Journal of the National Association of Administrative Law
Judiciary
Volume 30 | Issue 1
Article 7
3-15-2010
The Independent Medicare Advisory Committee:
Death Panel or Smart Governing?
Robert Coleman
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Robert Coleman, The Independent Medicare Advisory Committee: Death Panel or Smart Governing?, 30 J. Nat’l Ass’n Admin. L. Judiciary
Iss. 1 (2010)
Available at: http://digitalcommons.pepperdine.edu/naalj/vol30/iss1/7
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The Independent Medicare Advisory Committee: Death
Panel or Smart Governing?
By Robert Coleman*
TABLE OF CONTENTS
...... 237
I. INTRODUCTION............................................
241
.............................................................
II. HISTORY
241
A. What is 'Health care;' What is 'Medicine'?......................
B. A FederalHealth Care Policy Priorto World War I: Slippery Slope or
........ 244
.........................
Governmental Prerogative?
1. Franklin Pierce's Veto of Federal Subsidies for the Mentally Disabled.. 244
........ 245
2. The Progressive Era............................
C. Emergence of a NationalPublic Health Policy ...................... 246
246
1. World War I and the Spanish Flu of 1918 ......................
........... 247
2. The New Deal Era ...........................
D. How the CurrentEmployer-ProvidedHealth Care System Developed:
Roosevelt, Truman, Wage Controls, and the Internal Revenue Service....... 248
1. The Beveridge Report and Truman's Health Care Reform..................... 249
2. Wartime Wage Controls and the Tax Deduction for Health Care Benefits
. . . . .. ........
251
254
...........
E. Johnson & the Great Society .....................
........ 256
.........................
F. The Rise and Fallof HMOs
256
...............................
1. Nixon Passes the HMO Act of 1973
2. Managed Care: The Panacea of Rising Health Care Costs? .................... 257
259
....................................
3. Backlash
.......
261
......
Reform
Care
G. One More Time: Clinton's Stab atHealth
261
............................................
1. Managed Competition
III. MEDICARE: How THE PROGRAM CURRENTLY CURTAILS COST..................... 264
264
A. The MedicareAppeals Process.................................
1. The Administration of Medicare and the Administrative Procedures Act264
267
....................................
2. The Appeals Process
268
...........................................
3. Hays v. Sebelius
..... 269
..................
B. Medicare Payment Advisory Commission
IV. THE INDEPENDENT MEDICARE ADVISORY COMMITTEE ........................
....................................
A. Statutory ProvisionsofIM4C
B. Will The FederalAdvisory Committee Act Apply to IMAC?.......................
................................................
1. Requirements
.....
2. The Advice or Recommendation Requirement .............
3. Exclusion of Committees Wholly Composed of Federal Employees......
270
270
271
272
272
275
236
Journal of the National Association of Administrative Law Judiciary
30-1
TABLE OF CONTENTS CONT.
C. IMAC: A "FederalHealth Board.
........ 275
.....................
1. The Federal Reserve and the Sunshine Act...............................
278
2. Britain's National Institute for Health and Clinical Excellence .............. 279
281
.................................................
D. Rationing
V. DIAGNOSIS: IS HEALTH CARE IN AMERICA A FAILURE OR A SUCCESS?
A.
B.
C.
D.
..
......... 285
The Number of Uninsured Citizens.............................
......
................................
Cost andEfficiency
........
.................
Access to Care ................
....................................
Quality and Outcomes
288
291
297
298
VI. CONCLUSION: How WILL IMAC AFFECT AMERICAN HEALTH CARE? .. ........ 300
A. Instead ofIMA C, What Ought to Be Done to Curb Costs?......
.......................................
B. Conclusion
..... 300
..... 304
Spring 2010
The Independent Medicare Advisory Committee
237
I. INTRODUCTION
In 2009, lawmakers presented the American people with a serious
dilemma: Is it right that a government "death panel"' should be
* Robert Coleman is a second year student at Pepperdine University School
of Law. He attended the University of California Berkeley, where he studied
History and Philosophy. He owes his achievements to his parents, Ron and Carol
Coleman, and dedicates this article to their hard work.
1. Sarah Palin, Governor of Alaska, Statement on the Current Health Care
Debate
(Aug.
7,
2009),
http://www.facebook.com/note.php?note-id=1 13851103434 ("The America I know
and love is not one in which my parents or my baby with Down Syndrome will
have to stand in front of Obama's 'death panel' so his bureaucrats can decide,
based on a subjective judgment of their 'level of productivity in society,' whether
they are worthy of health care. Such a system is downright evil."). At the time
Governor Palin made this comment on her facebook.com page, critics and
journalists condemned her remarks as hyperbolic and incendiary. See, e.g., Jim
Rutenberg & Jackie Calmes, False 'Death Panel' Rumor Has Some Familiar
at
13,
2009,
available
N.Y.
TIMES,
Aug.
Roots,
http://www.nytimes.com/2009/08/14/health/policy/14panel.html; Ezra Klein, Is the
Government Going to Euthanize Your Grandmother? An Interview with Sen.
Johnny Isakson, WASH.
POST,
Aug.
10,
2009,
available at
http://voices.washingtonpost.com/ezraklein/2009/08/is thegovernmentgoing_to_eut.html. Several days later, Palin
explained that she had been referring to section 1233 of House Resolution 3200
which provides for end of life counseling to Medicare recipients. Sarah Palin,
(Aug.
12,
2009),
the
Death
Panels
Concerning
Since the bill's
http://www.facebook.com/note.php?noteid=116471698434.
purpose was to reduce Medicare spending, Palin declared that the end of life
counseling was intended to reduce costs and therefore ration care by coercing the
elderly into accepting end of life treatment. Id. Some lawmakers and journalists
echoed Palin's concern. See, e.g., Letter from Ruben Diaz, Chairman of the New
York State Senate Aging Committee, to Congressman Henry Waxman re Section
1233 of HR 3200 (July 27, 2009) available at http://www.nysenate.gov/pressrelease/letter-congressman-henry-waxman-re-section-1233-hr-3200;
Eugene
Robinson, Behind the Rage, a Cold Reality, THE WASHINGTON POST, Aug. 11,
at
http://www.washingtonpost.com/wp2009,
available
Section 1233, titled
dyn/content/article/2009/08/1 0/AR2009081002455.html.
"Advanced Care Planning," would have provided end of life counseling for
Medicare beneficiaries once their health conditions changed or once they entered a
nursing home. H.R. 3200, 111th Cong. § 1233 (2009), 2009 Cong. US HR 3200
(Westlaw). That section was ultimately removed from the bill. John Stossel,
Obamacare's Inevitable
Logic,
ABC
News,
Aug.
18,
2009,
http://abcnews.go.com/2020/Stossel/story?id=8358377.
238
Journal of the National Association of Administrative Law Judiciary
30-1
charged with the decision of "pull[ing] the plug on grandma,"2 or
would it be preferable that a "holocaust" 3 be perpetuated? Should we
ask Americans to "die quickly?" 4
Indeed, after the health care debate of 2009, no one will ever
accuse national lawmakers of soaring with the angels during their
Instead, rhetoric seems to have
recent intellectual discourse.
overshadowed what might have been a fruitful public dialogue on the
topic of health care in America. Health care expenditures have
spiraled out of control for consumers, employers, and the federal
government.s Moreover, the number of uninsured Americans stands
2. Jason Hancock, Grassley: Government Shouldn't 'Decide when to Pull the
Plug on Grandma', THE IOWA INDEPENDENT,
Aug.
12,
2009,
http://iowaindependent.com/1 8456/grassley-govemment-shouldnt-decide-when-topull-the-plug-on-grandma.
After Congressman Chuck Grassley declared that
section 1233 would "pull the plug on grandma," President Obama held a nationally
televised town-hall meeting where he addressed what he called the "legitimate
concern" of rationing care. ABC News: Obama Debunks Health Bill's 'Death
Panels.' (ABC television broadcast Aug. 13, 2009), available at
Obama cited Senator
http://abcnews.go.com/video/playerlndex?id=8304120.
Johnny Isakson, a Republican, who had authored an amendment to the Medicare
End of Life Planning Act of 2007, similar to Section 1233; and, Obama asserted
that end of life care would be voluntary and non-coercive and that it would merely
expand medical options to aging seniors, such as, by extending to seniors
information regarding living wills. See id; see also Klein, supra note 1.
3. Jonathan Allen, Grayson Likens Health Crisis, Holocaust, POLITICO, Sep.
30, 2009, http://www.politico.com/news/stories/0909/27769.html.
Democratic
Congressman Alan Grayson accused Republican opponents of the health care
reform bill of wanting uninsured Americans to "die quickly," and later refused to
apologize. Id. Rather, Congressman Grayson stepped up his indignation, stating
on the House floor, "I would like to apologize.... to the dead and their families
that we haven't voted sooner to end this holocaust in America." Id.
4. See supra note 3 and accompanying text.
5. DAVID GRATZER, THE CURE: How CAPITALISM CAN SAVE AMERICAN
HEALTH CARE 104 (2006) (citing projections from the Center for Medicare and
Medicaid Services (CMS)). From 1995 to 2000, Medicaid spending increased
from $156 billion to $207 billion, and from 2000 to 2005, Medicaid spending
increased to $330 billion. Id. Dr. Gratzer also cites a 2005 report on Medicare and
Social Security Trust Funds, which indicates that Medicare spending will increase
from 2.6% of GDP in 2004, to 13.6% by 2079, while creating a staggering
unfunded liability (the amount the program will cost beyond what it is expected to
take in through payroll taxes) of $68.3 trillion (or five times the current U.S. Gross
Domestic Product (GDP)). Id. at 126. Gratzer also discusses the rising out-ofpocket expenses many consumers face; however, Gratzer explains that, as a
Spring 2010
The Independent Medicare Advisory Committee
239
as a persistent scandal to many.6 To solve these matters, some have
advocated a national (federally-managed) health care system that
would cover all Americans.7 Yet, others have suggested that a
national health care system would lead to the rationing of health
care.8
Economic rationing consists of controlling the distribution of
scarce resources and services among a population.' This comment
explores whether the health care legislation currently making its way
through the United States Congress is establishing an administrative
percentage of total health care spending, out-of-pocket expenses have decreased
from 46% in 1962, to 22% in 1982, to 14% in 2002. Id at 32-40. This trend has
corresponded to a rising percentage in the expenditures of third-payer insurance
coverage and federal subsidies, respectively. See id. at 37. Gratzer supports this
thesis by citing Nobel Prize winning economist Milton Friedman, who wrote that
while the vast majority of goods and services invariably increased slower than the
inflation rate throughout the twentieth century, only health care services out-paced
inflation, resulting in a real increase in cost. Id. at 33-36. For example, in 1946,
total U.S. spending on transportation amounted to double the total cost of health
care expenditures (4.5% of GDP in 1946), whereas, by the late 1990s, one-and-ahalf times as much was spent on health care as on transportation (17% of GDP in
1997). Id.
6. See TOM DASCHLE, CRITICAL: WHAT WE CAN DO ABOUT THE HEALTHCARE CRISIS 3 (2008). Daschle writes that there are 47 million uninsured
Americans. Id.; but see infra notes 325-341.
7. See, e.g., DASCHLE, supra note 6, at 144-46. Daschle says that a "pure
single-payer system" poses a political hurdle, but does not dismiss the potential
virtue of a single-payer system. Id. at 144. Moreover, he rejects proposals that
individuals should be allowed to purchase their own insurance on an open market,
instead recommending a Federal Health Board (FHB) with a public insurance
option, like Medicare, provided by the government. See id. at 144-46.
8. JOHN C. GOODMAN ET AL., LIVES AT RISK: SINGLE PAYER NATIONAL
HEALTH INSURANCE AROUND THE WORLD 2-5 (2004). Goodman argues that
government limits high health care expenditures that are increased by high
consumer health care demand, by limiting health care supply. See id.
9. Compare Martin Feldstein, ObamaCare is All About Rationing, WALL ST.
at
available
2009,
18,
Aug.
J.,
10001424052970204683204574358233780260914.
http://online.wsj.com/article/SB
html ("The Obama strategy is to reduce health costs by rationing the services that
we and future generations of patients will receive."), with David Leonhardt, Health
Care Rationing Rhetoric Overlooks Reality, N.Y. TIMES, June 17, 2009, available
at http://www.nytimes.com/2009/06/17/business/economy/17leonhardt.html ("The
choice isn't between rationing and not rationing. It's between rationing well and
rationing badly.").
240
Journal of the National Association of Administrative Law Judiciary
30-1
body effectively charged with the rationing of health care resources;
insofar as it establishes a presidentially appointed Independent
Medicare Advisory Committee (IMAC).'o IMAC would be charged
with "making two annual reports dictating updated rates for Medicare
providers including physicians, hospitals, skilled nursing facilities,
IMAC's
home health, and durable medical equipment.""
recommendations would be implemented nationally, subject to a
Congressional vote.12 Congress would be granted a thirty-day
window to achieve a simple majority for or against the IMAC
recommendations.13
Critics of health care rationing cite examples of waiting lists and
long lines in Canada and elsewhere as proof that governmentmanaged health care leads to rationing.14 Some proponents of
national health care go so far as to advocate rationing as the best way
to curtail skyrocketing health care expenditures.'s Still, for the most
part, proponents of national health care (whether consisting of singlepayer reform or managed competition reforml 6 ) have suggested that
the political rhetoric about health care rationing is just thatrhetoric.'"
Former Alaska Governor Sarah Palin famously accused
proponents of the current federal legislation of instituting "death
panels" in order to ration health care.' 8 Rhetoric aside, advocates of
non-governmental, free-market health care reform argue that
rationing will be an inseparable component of a national health care
system.19 They submit that rationing finite health care resources is
the logical result of government-administered health policy. 20 These
10. See infra notes 199-208.
11. David Rogers, WH. Rolls at Medicare Agency Plan, Politico, July 15,
2009, http://dyn.ipolitico.com/printstory.cfm?wid-8155A62B-18FE70B2. See infra
notes 199-208.
12. See infra notes 199-208.
13. See infra notes 199-208.
14. See infra notes 396-399.
15. See infra notes 286-288.
16. See infra notes 153-156.
17. See ABC NEWS, supra note 2.
18. See supra note I and accompanying text.
19. See infra notes 299-309.
20. See infra notes 299-309.
Spring 2010
The Independent Medicare Advisory Committee
241
reformists further assert that free-market health care reform could
bring costs down without government intervention and without
rationing.21
Part II of this comment covers the history of American health
care. It lays out the federal government's evolving role in the arena
of public health and health care, starting in the mid-nineteenth
century and continues up to the present day. Part III examines the
existing process by which Medicare spending is controlled. This part
focuses on the administrative procedures that control Medicare
reimbursements. Part IV examines IMAC. This part discusses
IMAC's statutory provisions and the administrative transparency
laws IMAC would be bound to follow. The close of this part, draws
on three analogies as a gauge for how IMAC will operate: Senator
Tom Daschle's Federal Health Board (FHB) proposal; the
administrative oversight of the Federal Reserve; and the United
Kingdom's National Institute for Health and Clinical Excellence
(NICE).
Part V creates a snapshot of the U.S. health care system as it
operates today. This part emphasizes cost, quality, and accessibility
of health care, with comparisons to international and state-run health
care systems. Part VI briefly concludes this comment. Throughout
this paper there are a number of words, phrases, and agencies that
have been given acronyms to assist in the readability of this paper.
For convenience, an index of these acronyms can be found in an
appendix following this comment. 22
II. HISTORY
A. What is 'Health care;' What is 'Medicine'?
"Medicine's role," the philosopher Voltaire once quipped, "is to
entertain us while Nature takes its course." 23 Today, some two
hundred years later, some consider access to health care to be a
constitutional and moral right, as still others say neither right exists. 24
21.
22.
23.
24.
POST,
See infra notes 442-452.
Infra note 461.
GRATZER, supra note 5, at 11.
Compare David B. Rikin Jr. & Lee Casey, Illegal Health Reform, WASH.
Aug.
22,
2009,
available at
http://www.washingtonpost.com/wp-
242
Journal of the National Association of Administrative Law Judiciary
30-1
Indeed, nature's course notwithstanding, a lot has changed since the
eighteenth century. Most assuredly, little if anything has changed in
human physiology since humans first walked the Earth: bones still
break and cancer is still deadly. But Dr. David Gratzer, a Canadian
psychiatrist and proponent of free-market health care reform, prefers
to separate the practice of medicine into pre- and post-twentieth
dyn/content/article/2009/08/21/AR2009082103033.html (arguing that an individual
mandate requiring every American to buy health insurance would be in violation of
the Commerce Clause and the Taxing Power of Congress, respectively), and David
Rikin Jr. & Lee Casey, Is Government Health Care Constitutional?,WALL ST. J.,
June
22,
2009,
available
at
http://online.wsj.com/article/SB124562948992235831.html (arguing that a public
option would lead to a single-payer health system, which would impose undue
burdens on the right to privacy), with Akhil Amar, Constitutional Objections to
ObamaCare Don't Hold Up, L.A. TIMES, Jan. 20, 2010, available at
http://www.latimes.com/news/opinion/la-oe-amar2O-20 10jan20,0,4309186.story
(arguing that the federal government has the authority to regulate commerce, levy
taxes and protect human rights). Amar endorses a broad view of national defense,
such that curtailing health care spending might reasonably come under the national
defense power of Article I. See Amar, supra note 24. Amar also suggests that the
Fourteenth Amendment extends Congressional authority to protect human rights
and that health care "is such a right." Id. Further, Amar suggests that an individual
mandate is indistinguishable from requiring citizens to purchase automobile
insurance. See id. To be sure, the auto insurance argument is simply a red herring:
state governments require automobile owners to purchase auto insurance as a
condition of driving; the individual mandate would be the federal government
requiring all citizens to purchase health insurance as a condition of citizenship. See
Illegal Health Reform, supra note 24. Indeed, Rikin and Casey assert that while
the Supreme Court has viewed the Commerce Clause as expansive, Congress
cannot simply regulate Americans "because they are there." See id. The Court has
repeatedly affirmed that the Commerce Clause is not likened to the general police
power of the state; thus, Congress cannot regulate non-economic activity, which
might have a remote economic impact. Id. Here, the federal government is
attempting to require citizens to buy health insurance for no other reason than that
there exists people without health insurance. Id. Moreover, the power to tax is
limited such that where Congress's exercise of the taxation power has a regulatory
effect, Congress must be able to rely on the Commerce Clause in the alternative:
where a law enacted pursuant to the taxation power constitutes a mere regulation
(of conduct), it does not hold muster. Id. Rikin and Casey further assert that the
substantive right of privacy could be burdened in the event that a national health
care system becomes single-payer.
See Is Government Health Care
Constitutional?,supra note 24. To wit, where the government expands its health
care role, becoming sole and final decision-maker regarding which medical
treatments will be reimbursed under the national health system, government
decisions relating to private medical matters will become manifold. Id.
Spring 2010
The Independent Medicare Advisory Committee
243
century paradigms. 25 Gratzer asserts that in the decades leading up to
the twentieth century, medical practitioners developed new
treatments at an increasing rate. 26 But in the twentieth century, cures
to ancient illnesses began to develop.2 7
At the dawn of the twentieth century, polio was crippling, old age
meant painful degeneration and immobility, while schizophrenia
meant institutionalization or, worse, a lobotomy. 28 Among children,
ailments such as measles, whooping cough and leukemia were often
death sentences. 29 In 1924, President Calvin Coolidge's sixteenyear-old son succumbed to an infected blister he developed playing
tennis at the White House. 30 The son of the President of the United
States died because antibiotics did not exist.
In 1941, a British police officer, Albert Alexander, scratched his
face on a rose bush and nearly succumbed to an infection. 3 ' Albert's
wound became septic, his face was covered with abscesses and he
lost his left eye. 32 Albert's doctor, Charles Fletcher, decided to
administer a new treatment, which would prove to be a medical
33
February 12th , 1941, Albert became the first
breakthrough.3 3 On
human recipient of penicillin. 34 His temperature dropped within four
days.
Since the introduction of penicillin, our understanding and
expectations of health care have dramatically changed.36 Childhood
25. GRATZER, supra note 5, at 11-13. Gratzer writes that prior to the
twentieth century, doctors could offer little more than comfort to ailing patients.
Id. Although the late 1800s witnessed the development of many new medical
treatments, this treatment provided comfort rather than cures. Id. It was not until
the middle of the twentieth century when medical breakthroughs equipped doctors
with curative treatments for centuries' old illnesses. Id.
26. Id.
27. Id
28. Id. at 12-13.
29. Id.
30. GRATZER, supra note 5, at 13.
31. Id.
32. Id.
33. Id.
34. Id
35. GRATZER, supra note 5, at 13.
36. Id. at 16. Gratzer writes that the improved quality of life Americans enjoy
well into old age is unique to the modem era. Id.
244
Journal of the National Association of Administrative Law Judiciary
30-1
leukemia is survivable in nearly every case. 37 Schizophrenia is
routinely treated with antipsychotics. 38 The first open heart surgery
was performed in 1955, and in 1963 the first kidney transplant was
performed.3 9 Strokes can be prevented and hips can be replaced even
in old age, while chemotherapy prolongs the life of cancer patients
and the first test-tube baby solved infertility.40 Yet, in 1787, no one
could have claimed that access to such life-saving health care was a
moral right to be enshrined in the Constitution: the knowledge and
technology for such care did not exist.
B. A FederalHealth CarePolicy Priorto World War I: Slippery
Slope or GovernmentalPrerogative?
1. Franklin Pierce's Veto of Federal Subsidies for the Mentally
Disabled
In 1854, President Franklin Pierce vetoed a bill that would have
mandated each of the several states to set up permanent funds to
provide social support for the mentally disabled. 4 ' Pierce surmised
that if the federal government took up the task of caring for "all the
poor in all the States," such "public philanthropy" would serve as an
initial misstep down a slippery slope of federally subsidized
welfare. 42 Pierce declared that the General Welfare Clause is not a
37.
38.
39.
40.
41.
Id. at 15.
Id.
Id. at 14.
GRATZER, supra note 5, at 14.
Franklin Pierce, President of the United States, Veto Message (May 3,
1854),
available
at
http://www.presidency.ucsb.edu/ws/index.php?pid=67850&st-veto&stl=franklin+
pierce. The Senate bill proposed that the Federal government apportion 10 million
acres of land to the several states, each of which would sell the lands and invest the
proceeds into perpetual funds. Id. The interest from the funds was to be
"appropriated to the maintenance of the indigent insane within the several States."
Id.
42. Id.
("It can not be questioned that if Congress has power to make
provision for the indigent insane. . . . it has the same power to provide for the
indigent who are not insane, and thus to transfer to the Federal Government the
charge of all the poor in all the States."). Pierce feared that "public philanthropy"
on the part of the federal government would lead to limitless Congressional
Spring 2010
The Independent Medicare Advisory Committee
245
"substantive general power to provide for the welfare of the United
States."4 3
2. The Progressive Era
In the five decades after the Pierce administration, the Industrial
Revolution drastically changed the American workplace, sparking a
new debate about the rights of workers. By the 1910s, the
Progressive movement was advocating health care for all citizens.4
In 1914, the American Association for Labor Legislation (AALL)
drafted a bill, which would have extended medical care to all
workers.4 5 The AALL sent the bill to several state legislatures.4 6
Only California and New York took notice, but the bill was soundly
defeated in both states.4 7
The legislation met broad opposition from employers, insurance
companies, unions, and physicians who feared regulation of their
fees. 4 8 According to Senator Daschle, opponents of the reform,
frightened by the Red Scare, raised the specter of "socialized
medicine." 4 9 By 1919, the bill was history.o Still, perhaps as a
safeguard against future government intervention, some employers
began offering health care coverage as a fringe benefit.51
legislation enacted for the purpose of providing care for citizens who fall on hard
times. See id.
43. Id. ("It is not a substantive general power to provide for the welfare of the
United States, but is a limitation on the grant of power to raise money by taxes,
duties, and imposts. If it were otherwise, all the rest of the Constitution, consisting
of carefully enumerated and cautiously guarded grants of specific powers, would
have been useless, if not delusive.").
44. DASCHLE, supra note 6, at 47-49.
45. Id. at 47.
46. Id.
47. Id. at 48.
48. Id. at 48. For instance, Samuel Gompers, founder of the American
Federation of Labor (AFL), blasted the legislation as an attack on workers' liberty.
Id.
49. DASCHLE, supra note 6, at 49.
50. Id.
51. Id. at 48.
246
Journal of the National Association of Administrative Law Judiciary
30-1
C. Emergence of a NationalPublic Health Policy
1. World War I and the Spanish Flu of 1918
Just as the turbulent First World War was coming to an end, a
public health crisis emerged which all but devastated domestic
tranquility. The Spanish Flu of 1918 ultimately infected half the
world's population and claimed more than 20 million lives
worldwide. 52 The American Red Cross, a nongovernmental charity,
responded to the pandemic swiftly. 3 As the flu spread, the United
States Public Health Service (USPHS) issued a plan of action to a
newly organized Red Cross National Committee on Influenza.5 4 The
plan required the mobilization of health care practitioners and the
allocation of salaries and resources, with the USPHS conducting "all
necessary dealings with state and local boards of health concerning
the allocation of resources and personnel.""5
52. See The Influenza Pandemic of 1918 and the Red Cross Response,
REDCROSS.ORG,
http://www.redcross.org/museum/history/influenza.asp#more.
Some have argued that the unprecedented interaction of so many multinational
soldiers during World War I (WWI), with weakened immune systems hastened the
transmission of the flu. See BBCNEWS.COM, 1918 Killer Flu Secrets Revealed,
Feb. 5, 2004, http://news.bbc.co.uk/2/hi/health/3455873.stm.
53. The Influenza Pandemic of 1918 and the Red Cross Response, supra note
52.
54. Id. The USPHS can be traced to a 1798 federal law that provided care for
injured merchant marines, and set up marine hospitals. U.S. Public Health Service
Commissioned Corps, http://www.usphs.gov/AboutUs/history.aspx (follow "About
the Commissioned Corps" hyperlink; then follow "History" hyperlink). During the
immigration waves of the late nineteenth century, the USPHS expanded its role to
include screening immigrants as they arrived. Id. In 1878, the National Quarantine
Act wrested the power of quarantine from the States, allowing the USPHS to
conduct quarantines. Id. Today, the USPHS serves multiple agencies such as the
Food and Drug Administration (FDA), the Centers for Disease Control (CDC) and
the CMS. Id. (follow "About the Commissioned Corps" hyperlink; then follow
"Agencies" hyperlink).
55. The Influenza Pandemic of 1918 and the Red Cross Response, supra note
52. The pandemic ended in early 1920, after more than $2 million had been raised
by the Red Cross, and after over a half-million American lives had been lost. Id.
Spring 2010
The Independent Medicare Advisory Committee
247
2. The New Deal Era
At the beginning of the 1900s, medical services remained fairly
cheap and most Americans paid out of pocket for their expenses. 5 6
For the indigent, charitable organizations picked up the tab while
doctors frequently discounted their poorer patients." But as the era
of curative medicine kicked in, technology, demand, and prices
In 1927, a Committee on the Cost of
correspondingly increased.
Medical Care (CCMC) formed to address the rising cost of health
care. 59 The committee was especially concerned with the problems
of cost and accessibility in rural areas.60 As an alternative to
practicing medicine independently as most doctors did at the time,
the committee recommended that health care professionals form
practices to provide rural health services. 6 1 The practices would be
spread throughout rural America and share the costs of facilities,
while larger practices with larger facilities would be located in larger
cities. 62 The services they provided would be funded by insurance
and tax dollars. 63
- In 1935, President Franklin Roosevelt employed the assistance of
former CCMC member Isidore Falk to draft sections of the Social
Security Act, which would have provided subsidies for universal
The American Medical Associations
health care insurance. 64
(AMA), which had assailed the CCMC report, campaigned against
Roosevelt's proposal.65 The AMA asserted that the plan would limit
patient choice, lead to higher costs, diminish the quality of care and
create a "compulsory system of care." 66 After a rancorous debate,
56. JAN COOMBS, THE RISE AND FALL OF
CARE REVOLUTION 3-6 (2005).
HMOs: AN AMERICAN HEALTH
57. Id.
58. Id.
59. Id. The CCMC was comprised of sixty health care professionals who
concluded that America required comprehensive national health coverage. Id.
60. Id.
61. COOMBS, supranote 56, at 3-6.
62. Id.
63.
64.
65.
66.
Id
Id
Id.
COOMBS, supra note 56, at 3-6.
248
Journal of the National Association of Administrative Law Judiciary
30-1
the Social Security Act passed without federal health care subsidies. 6 7
Roosevelt was only getting started on health care reform. 68
D. How the CurrentEmployer-ProvidedHealth Care System
Developed: Roosevelt, Truman, Wage Controls, and the Internal
Revenue Service
Today, the U.S. health care system consists of a predominantly
employer-provided, private insurance system operating alongside a
public sector regime, predominantly consisting of Medicare and
Medicaid.6 9 Employer-provided, or third-payer, health insurance has
its roots in pre-payment health care pools like the BlueCross and
BlueShield (BCBS) nonprofit insurance plans. 70 BlueCross first
sprung from a program founded at Baylor University in Dallas,
Texas, providing pre-paid hospital insurance to school employees.71
This system allowed employees to buy into a pool at a monthly or
yearly rate in exchange for hospital services, as they required.7 2
BCBS later extended the plan to employee groups throughout
Dallas. 73 During the early 1900s, many employers began enrolling
their employees in prepayment systems. 74 As early as the 1910s,
employers feared that a national health care system would strip
businesses of personal autonomy.
A series of World War II
(WWII) era political events would cause the number of employerprovided health care plans to swell.
67. Id.
68. See infra notes 78-79.
69. See infra notes 70-99.
70. See, e.g., DASCHLE, supra note 6, at 49; BlueCross BlueShield
Association, About BCBSA - History of Blue Cross BlueShield,
http://www.bcbs.com/about/history/ (last visited Jan. 23, 2010).
71. BlueCross BlueShield Association, supra note 70.
72. Id.
73. Id
74. DASCHLE, supra note 6, at 48-49, 77.
75. Id
Spring 2010
The Independent Medicare Advisory Committee
249
1. The Beveridge Report and Truman's Health Care Reform
On December 1, 1942, British economist Lord William
Beveridge issued a report to the House of Commons with solutions to
the ubiquitous social evils of poverty, ignorance, and disease in
British society.76 The report advocated that government become
more active in social policy by establishing public health insurance
for all citizens, creating the model for the British National Health
Service (NHS)."
Just one month after the report's publication,
President Roosevelt delivered his State of the Union Address, in
which he declared that social security must extend from "cradle to
grave," and pushed to amend the Social Security Act to include
Some deemed Roosevelt's renewed agenda an
health care.7 8
"American Beveridge Plan." 79
76. GRATZER, supra note 5, at 29.
77. Id. at 29-30. Echoing this call, one Member of Parliament, Lord Douglas
Jay, declared that, with respect to nutrition, education and health, Parliament
simply knows more about "what is good for people than the people know
themselves." See id. at 29-30. Gratzer describes Beveridge and Jay as acting out
of both "compassion" and "paternalism." Id. at 29. Lord Douglas Jay further
declared that "[h]ousewives on the whole cannot be trusted to buy all the right
things where nutrition and health are concerned," inasmuch as a housewife, "would
not trust a child of 4 to select the week's purchases." Id. Gratzer is highly critical
of Jay's attitude for its paternalistic view of the role of government in addition to
its obvious "misogyny." See id. Gratzer suggests such an attitude might have been
justified in a war-torn England where food was rationed, life expectancy was low
and public health was substandard. Id. Still, Gratzer emphasizes that this was a
very "different world," with the implication being that England has outgrown any
possible need it might have had for the British National Health System (NHS). See
id.
78. See, e.g., id at 30; Cradle to Grave Pigeonhole, TIME, Mar. 22, 1943,
available at http://www.time.com/time/magazine/article/0,9171,796080,00.html;
Franklin Roosevelt, President of the United States, State of the Union Address (Jan.
7, 1943), available at http://www.presidency.ucsb.edu/ws/index.php?pid=16386.
Roosevelt supported a Congressional bill, Wagner-Murray-Dingle, which would
have amended the Social Security Act to include health coverage, reviving efforts
to institute national health care. GRATZER, supranote 5, at 30.
79. Cradle to Grave Pigeonhole, supra note 78. Some deemed Roosevelt's
721-page social security plan the "American Beveridge Plan" only more vast its
scope and more vague in its objectives. Id.
250
Journal of the National Association of Administrative Law Judiciary
30-1
Roosevelt died just over a year later, but President Truman
pursued national health care with vigor.80 The AMA and the U.S.
Chamber of Commerce backed a Republican effort to defeat
The AMA and the Chamber of
Truman's health care bill. 8 '
Commerce encouraged employers to purchase group insurance. 82
The AMA called on doctors to advise their patients to purchase
private insurance. 83 Meanwhile, popular support for national health
80. DASCHLE, supra note 6, at 51-55. In a 1945 address to Congress, Truman
declared that, "the health of [America] is a national concern [and] that financial
barriers.... shall be removed." Id. at 51.
81. Id. at 52-54. In Senator Daschle's analysis, the threat of a Communist
infiltration allowed government-run health care opponents to raise the specter of
creeping socialism. Id. Daschle writes that the AMA, national Republicans and
the U.S. Chamber of Commerce formed a political coalition to oppose Truman's
national health care; and that they intentionally associated Truman's health care
reform with the looming communist threat in Europe. Id. The implication is that
this campaign was intended to arouse the fear of communism among average
Americans. See id. However, Daschle's criticism of the claim that "socialized
medicine" was being instituted is more of a conclusion than an argument: never
does he distinguish what "socialized medicine" would actually entail from what
Truman, Roosevelt or the progressives were proposing. Id. at 60. If "socialized
medicine" is a synonym for single-payer health care, in which the government
finances all health care, one could find an analogue in Canada. Id. Canada's health
system bans private insurance and has been described as "a national health
insurance with federal contributions, provincial administration and a for-profit but
independent delivery of primary care within the context of a government-financed
system." GRATZER, supra note 5, at 165. Some have suggested that certain reform
efforts, including Daschle's own recommendation of a Federal Health Board,
would inevitably lead to complete Federal control of the health care industry. See
Tom Price, Congressman, The GOP Should Fight Health-CareRationing, WALL
ST.
J.,
Jan.
7,
2009,
available
at
http://online.wsj.com/article/SB123128781030459191.html.
Indeed, some have
noted that Daschle's own suggestion, which would make employer and business
compliance with the Federal Health Board's health policy a condition of health care
tax deductions, a "political ruse" which seeks to eliminate private insurance
altogether, thus inevitably leading to a single-payer system. See, e.g., id.; Michael
Barone, Video Proof Obama Wants a Single-Payer System, WASHINGTON
EXAMINER, Aug. 9, 2009, http://www.washingtonexaminer.com/politics/VideoIn 2003, then-U.S.
proof-Obama-wants-a-single-payer-system-52699182.html.
Senate candidate Obama unequivocally declared support for the idea of a singlepayer national health care system and the elimination of employer-provided health
care. See Barone, supra note 81.
82. DASCHLE, supra note 6, at 52-54.
83. Id.
Spring 2010
The Independent Medicare Advisory Committee
251
care plummeted from a 75% approval in 1945 to only 21% in 1949.84
In 1946, Republicans regained control of Congress for the first time
in fourteen years.
By 1949, Truman's reform effort had fizzled.8 6 As the smoke
More
settled, an employer-provided health care system surfaced.
benefit.
businesses began offering health insurance as a fringe
Unions fell in line with employer coverage as it provided a great
Senator Daschle asserts that the
benefit to its members."
arrangement made sense insofar as the post-WWII era was marked
by an economic boom for the American industrial sector: corporate
income was plentiful and foreign competition remained low.90
2. Wartime Wage Controls and the Tax Deduction for Health Care
Benefits
During WWII, President Roosevelt instituted price and wage
controls, declaring that, "where any important article becomes scarce,
rationing is the democratic, equitable solution." 91 Wage controls
were intended to prevent the inflation of wages as mass amounts of
military enlistments led to labor scarcity. 9 2 In response, employers
extended incentives to their employees in the form of fringe benefits,
such as health insurance. 9 3
On October 26, 1943, the Internal Revenue Service (IRS) issued a
tax ruling, which allowed employers to bypass Wartime wage
controls by giving employees fringe benefits, tax-free.9 4 In 1954, the
IRS codified this ruling, allowing employers a tax deduction for the
84. Id at 53.
85. Id. 51-55.
86. Id
87. DASCHLE, supra note 6, at 54-58.
88. Id. In 1950, General Motors extended health insurance to its employees.
Id. The president of General Motors, Charles Wilson, condemned the idea of
nationalized health care as a threat to the free market and individual autonomy. Id.
89. Id. at 54-58.
90. Id.
91. GRATZER, supra note 5, at 25.
92. DASCHLE, supra note 6, at 50.
93. E.g., id.; GRATZER, supra note 5, at 25.
94. GRATZER, supranote 5, at 25.
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Journal of the National Association of Administrative Law Judiciary
30-1
health care benefits they provided.95 Between 1946 and 1957, union
workers covered by employer-provided health care increased from 1
million to 12 million, with an additional 20 million of their family
members covered as well. 9 6 By 1963, 77% of Americans had
hospital insurance.9 7 Although more Americans than ever have
become insured this way, critics of the third-payer system include
free-market reformists9 8 and national health care advocates alike. 99
95. Id.
96. DASCHLE, supra note 6, at 55.
97. Id.
98. See GRATZER, supra note 5, at 25-27, 31-44. On the free-market side,
David Henderson, an economist who served on President Reagan's Council of
Economic Advisers, explains that employers became attracted to the third-payer
system because it allows them to shift taxable compensation into nontaxable health
benefits, thereby incentivizing more lavish health plans for employer and
employee. Id. at 25-27. To illustrate the incentive, Gratzer cites Henderson's
account of a conversation between Henderson and Harvard economist Martin
Feldstein, where Feldstein concluded that the typical employee making $40,000 in
the year 2000, with a spouse making $25,000, would likely fall in the 28% Federal
tax bracket. Id. Feldstein combined the 28% with 12.4% in social security taxes,
2.9% in Medicare taxes, 5% in state income taxes (3.6% after the Federal
allowance for state income taxes is assessed), to arrive at 46.9% in taxes paid,
thereby leaving the typical employee with about 53.1% (530 on the dollar) of his
earnings after taxes. Id. Thus, whereas $1 of compensation becomes about 530
after taxes, $1 of nontaxable health care benefits remains $1 of health care benefits.
Id. The employee is better off to take the health care benefits rather than purchase
insurance on his or her own, since individuals are not granted the tax deduction: $1
that could have gone to health insurance becomes only 530 toward health
insurance. Id. Therefore, it is better to offer lavish health benefits than more
compensation, because the tax exclusion allows each dollar an employer invests
into health insurance to be maximized as each dollar transfers directly from
employer to employee without a tax consequence to either party. Id. However,
free-market reformists assert that this third-payer regime creates the artificial sense
for employees that (aside from the co-pay and the deductible) their health care is a
"free" benefit; thus, causing the employee with health insurance to consume health
care resources in a wasteful and unreasonable fashion, and driving up employer
costs to boot. Id. at 31-44. By contrast, Gratzer argues than an "insurable event"
ought to be one which is (a) unlikely to happen, (b) will come without warning and
which (c) is not something the insured person desires. Id. at 31. To this end,
Gratzer compares health insurance to automobile insurance, asserting that while
Americans pay into auto insurance policies which cover large expenses like major
accidents which they expect not to occur, with health insurance Americans pay to
cover "virtually everything" from minor to major health needs. Id Indeed, the
average American family pays $9,000 per year for health plans with fairly low
Spring 2010
The Independent Medicare Advisory Committee
253
deductibles; yet an automobile insurance plan with a low deductible that included
major body work as well as oil changes, gas and paintjobs would be considerably
more expensive. Id at 31-32. In Gratzer's view, this insurance model directly
caused the cost of health care to outpace the rise of inflation, a phenomena not seen
in the costs of most other goods and services. Id. at 33-35. Gratzer also refutes the
argument that the increase in medical science, paired with an increase in research
and development, has led to the increase in health care costs. Id. at 33-35.
Reiterating the comparison to other sectors of the economy, such as the computer
and fast-food industries, technological advancements have brought costs down, not
up. Id. However, one notable area of health care has seen, both, an increase in
technological advancement as well as dramatic decreases in cost: cosmetic surgery.
Id. at 36. Between 1992 and 2002, the instances of cosmetic procedures increased
by 400% while real cost has decreased. Id. Botox and laser resurfacing are
undeniably recent technological innovations, yet their prices are falling. Id. And
cosmetic procedures are generally paid for out of pocket. Id. Out of pocket
expenses, however, have decreased from 46% to 14% of total health care spending
between 1962 and 2002. Id To illustrate the problem created by low out of pocket
expenses, Gratzer analogizes the purchase of food and clothing (basic necessities
like health care) to health care, and suggests that if a third party, such as an
employer, paid 860 on each dollar of a person's grocery bill, that person would
have a decreased incentive to shop rationally because the prices would be
artificially deflated. Id. at 37, 43. In response, the employer and the government
(which already provides Medicare and Medicaid) place bureaucratic constraints on
usage. Id. at 38-40. Moreover, since the tax deduction increases with the tax
bracket, higher paid employees experience the fruits of this tax subsidy, while
lesser paid employees benefit the least-distinguishing it from most other forms of
tax subsidy. Id. at 27-28. Consequently, as of 2004, an employee making more
than $100,000 earned an average of $2,750 in nontaxable health insurance benefits,
while an employee making $40,000-$49,000 earned an average of $1,500 per year
in tax-free health benefits. Id.
99. See DASCHLE, supra note 6, at 55-58. National health care advocates
bemoan the downfall of "community rating" resultant from the rise of third-payer
insurance. See id. at 56-57. BlueCross and BlueShield initially used a community
rating, in which each person in the pool pays the same premium regardless of age
or health status, in order to determine policy prices. Id. Community rating
essentially requires the young and healthy to subsidize the old and the sick. Id. By
contrast, commercial insurance companies, which grew in market share under the
third-payer regime, had established actuarial tables based on age, risk and sex. Id.
Commercial insurance companies were thus able to offer cheaper policies to the
young and healthy. Id. Left with an older and less healthy pool of customers,
BlueCross and BlueShield began to raise premiums, ultimately adopting the same
actuarial system. Id. As a result, the number of uninsured elderly increased. Id.
Some of the economic brunt of this was softened as unions gained pensions and
health benefits for retirees in the late 1950s. Id. This gave unions an incentive to
advocate a national health care system for the elderly: if the government covered
retirees, unions could gain higher wages for current workers. Id. at 57-58. Daschle
254
Journal of the National Association of Administrative Law Judiciary
30-1
E. Johnson & the GreatSociety
By the early 1960s, public support was growing for a federal
health care program covering the elderly.' 00 As a candidate for
President, John F. Kennedy supported passing this program through a
0
"Medicare" bill.o'
Kennedy was unable to fulfill this goal prior to
his 1963 assassination.' 0 2 Campaigning for President the following
year, Lyndon Johnson included a federal health care plan for the
elderly as part of his Great Society platform. 103
After Johnson and his party in the Congress won decisive
victories, Johnson moved quickly to pass a Medicare bill.104 Unions,
such as the American Federation of Labor and Congress of Industrial
Organizations (AFL-CIO), immediately supported Medicare.' 05
While the AMA opposed the federal health care plan, the American
Hospital Association (AHA) also supported Medicare.' 0 6 By 1965,
three bills had made it to the House for consideration: (1) a bill to
amend the Social Security Act to provide universal health care for all
elderly Americans was supported by Johnson and the unions; (2)
"Eldercare," which would have expanded the 1960 Kerr-Mills Act by
helping states pay for the indigent elderly, was supported by the
AMA; and (3) "Bettercare," which would have provided federal
notes that as unions started to gain retirement health benefits for their members,
retiree benefits strained employers' finances, tying up funds that could be spent on
wage increase for non-retired union members. Id. Unions, such as the AFL-CIO
suddenly had an interest in promoting a federally provided national health system
for retirees and seniors. Id. In the late 1950s, the AFL-CIO drafted a bill and
began lobbying the Federal government. Id.
100. Id. at 57-60. The 1960 Kerr-Mills Act granted states funds to care for the
indigent elderly. Id. at 59. The program floundered as many states failed to
implement it, many of which because could not afford to pay for it. Id. Moreover,
many doctors and hospitals refused to take part in the program as the
reimbursements were low. Id.
101. See, e.g., id. 59-60; GRATZER, supra note 5, at 125.
102. DASCHLE, supra note 6, at 59-60.
103. Id. at 60-61.
104. Id. at 61.
105. Id.
106. Id. at 60. Hospitals were losing money by providing services to indigent
elderly patients and Medicare reimbursements provided a solution. Id.
Spring 2010
The Independent Medicare Advisory Committee
255
subsidies for the indigent elderly to buy private insurance, was
supported by private insurance companies.' 0 7
Congressman Wilbur Mills combined aspects of all three and
gained bipartisan support for a three-layered Medicare bill: Part A
would cover hospital care, nursing and home care for all senior
citizens; Part B would be an optional program covering doctor's
visits for all senior citizens; and Medicaid would cover certain
indigent Americans such as seniors, single-parent families, and
persons with disabilities. 0 8 In 1965, President Johnson held the
famous signing ceremony for the Medicare bill in Independence,
Missouri with former President Harry Truman at his side.109 There,
Johnson granted Truman the first Medicare card." 0 Today, Medicare
remains a health care system in which the federal government
collects and pays all medical fees with tax revenues, providing health
107. DASCHLE, supra note 6, at 61.
108. Id. at 62; see also GRATZER, supra note 5, at 124-25 (arguing that Mills'
Medicare bill contained structural flaws that have caused the cost of the program to
increase beyond expectations). Gratzer argues that Mills was able to gain
bipartisan support by drafting a compromise legislation which reflected the
circumstances of the time. GRATZER, supra note 5, at 124-25. In the early 1960s,
health care was cheaper, the population was younger and the elderly population
was proportionately less than it is today. Id. Free-market reformists argue that
Medicare created the same problem prevalent in the private third-payer system. Id.
That is, by making coverage "free" at the point of consumption (or, in the case of
the third-payer system, making deductibles high, with co-pays and out of pocket
expenses remaining low) the elderly became "over-insured" and, in the absence of
negative disincentives to curtail their usage (such as having to make out-of-pocket
payments), the elderly began to over-use health care resources. Id. On the other
hand, Senator Daschle approvingly reflects that, while Medicare did not initially
cover prescription drugs and long-term care, it was the "largest expansion of
health-care coverage in American history." DASCHLE, supra note 6, at 62. But,
Daschle writes that the end result was a compromise program, which did not fully
reflect the objectives of President Johnson or the labor unions. Id. Daschle also
asserts that the hospitals, doctors and insurance companies who had been dragging
their feet for decades became immense financial beneficiaries of the new programs.
Id. at 63-64. Hospitals, BlueCross and the AHA gained a reimbursement formula
covering "allowable expenses" plus a 2% bonus with no limit. Id. For-profit and
nonprofit nursing homes were reimbursed for all costs plus a 7.5% profit. Id. Until
Medicare, doctors often charged patients whatever they felt the patients could
afford. Id. But under Medicare Part B, doctors began charging Medicare as much
as possible. Id.
109. DASCHLE, supra note 6, at 62-63.
110. Id.
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Journal of the National Association of Administrative Law Judiciary
30-1
care to eligible citizens over the age of sixty-five."' Medicaid
provides healthcare to eligible families with low incomes and is
administered by the states with state and federal subsidies.112
F. The Rise and Fall of HMOs
1. Nixon Passes the HMO Act of 1973
The first Health Maintenance Organization (HMO) was
developed in the early 1930s when a physician approached Henry
Kaiser, the owner of a Los Angeles construction firm, offering him
medical services for each of Kaiser's worker at a cost of five cents
per day.11 3 Kaiser offered the plan to the public after WWII.114 An
HMO is a type of health insurance, which joins doctors and other
health care providers into a network to provide services at a flat rate
without deductibles."s HMO patients are limited to the doctors and
medical providers within the HMO network.1 6 HMOs became
popular on the West Coast and more than four million were enrolled
in HMOs by the time Richard Nixon became President." 7
In his first year in office, President Nixon spoke of an imminent
"crisis" in the health care system."' With the costs of health care
skyrocketing, Nixon aimed at shifting 90% of the country onto
HMOs.' 19 The HMO Act of 1973 passed in a bipartisan effort,
backed by the Whitehouse and the late Senator Edward Kennedy.' 20
The HMO Act of 1973 created a national market for HMOs by
removing state-imposed restrictions on HMOs and mandating that
employers with more than twenty-five employees offer HMO plans
§ 1395 (2006).
112. 42 U.S.C. § 1396 (2006).
111. 42 U.S.C.
113. GRATZER, supra note 5, at 47.
114. Id.
115. DASCHLE, supra note 6, at 70.
116.
117.
118.
i19.
120.
Id.
GRATZER, supra note 5, at 46-47.
Id. at 45.
Id. at 46.
Id. at 47.
Spring 2010
The Independent Medicare Advisory Committee
257
alongside traditional indemnity insurance. 121 It also extended federal
loans and grants to start up new HMOs.12 2
2. Managed Care: The Panacea of Rising Health Care Costs?
By the 1990s, HMOs, or managed care, had secured bipartisan
political support.123 A consensus view among free-market reformists
and single-payer advocates is that access to plentiful health-care
resources through third-payer insurance and government subsidies
has led to supply-induced demand and the overuse of health care
resources-consumers have no incentive to curb their usage because
their usage is subsidized.124 Enter, managed care.
By the early 1980s, employers who offered health plans with
indemnity insurance were feeling the brunt of rising health-care
costs.125 Both General Motors and Chrysler Corporation were
spending more to cover employee health benefits than they were on
121. Id.
122. Id.
123. GRATZER, supra note 5, at 49. With Medicare and Medicaid straining
the federal budget, Republican House Speaker Newt Gingrich, among others,
praised HMOs as the way to curtail runaway Medicare spending. Id. Vermont
Governor Howard Dean, who oversaw the institution of a statewide universal
health care system in Vermont, also praised HMOs. Id. Dean, the former
Democratic Party Chairman, is also a medical doctor who once served on an HMO
board. Id.
124. See id. at 48. Stanford economist Alain Enthoven, who would later
support President Clinton's health care reform, became a leading academic
proponent of HMOs. Id. Since the 1970s, Enthoven has been asserting that
extending evermore health care expenditures, whether through state and Federal
programs or employee benefit plans, causes supply-induced demand and the overuse of health care resources. Id. This position is shared by both free market
reformists and single-payer health care advocates alike. See, e.g., id. at 48-49;
DASCHLE, supra note 6, at 68-69. In other words, health care consumers will have
no incentive to curtail the amount of health care resources they consume because it
rarely means a difference in personal cost: deductibles, co-pays and out-of-pocket
expenses are low for the average consumer. GRATZER, supra note 5, at 48-49. For
doctors and hospitals, there is no reason not to persuade consumers to over-use or
over-spend; Medicare, Medicaid, and employer provided insurance reimburse
doctors and hospitals' fees. Id.
125. DASCHLE, supra note 6, at 68-69.
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Journal of the National Association of Administrative Law Judiciary
30-1
steel and rubber.' 26 In a nutshell, indemnity insurance allows
covered employees to choose their doctors, doctors to choose
treatments, and employers to pay insurance companies to pick up the
bills.127 Between the early 1980s and 1993, health care expenditures
soared from 8.9% to 13.6% of U.S. Gross Domestic Product
(GDP).128
In HMOs, patients can only choose from the doctors within the
HMO network, while the HMO approves of financing.129 in
exchange for keeping costs low, doctors and hospitals, which are
inside the HMO network, are guaranteed patients by the HMO.130
Patients will pay more should they seek services outside the
network.131 HMOs are paid the same regardless of the health status
of its patients; therefore, HMOs have an incentive to keep costs down
so that profits go up.' 32
In 1988, about three-quarters of American workers were covered
by indemnity insurance.133 By the late 1990s, indemnity insurance
comprised only 14% of the total health insurance market. 134 HMO
enrollment skyrocketed from 4 million in 1969, to 9.1 million in the
mid-1980s, to 36.5 million in 1990, and peaked at 79 million in
1998.135 The increased size of HMOs led to greater buying power:
126. Id. One General Motors executive quipped that BlueCross and
BlueShield were bigger suppliers to General Motors than U.S. Steel. Id Famed
Chrysler CEO Lee Iacocca experienced the same grief when he took the helm at
Chrysler Corporation in 1978: more money was being spent on health care benefits
than on steel and rubber! Id.
127. Id. at 70.
128. Id.
129. Id.
130. Id. In managed care, the HMO firm is a third-party provider, who pays
for the services of its patients; however, the HMO will pick the doctors and
providers. Id. HMOs provide patients to doctors who will keep the HMOs' costs
low; if patients want additional services that their doctors in the HMO network will
not cover, patients can shop outside the network and pay more. Id.
131. DASCHLE, supra note 6, at 70
132. Id.
133. GRATZER, supra note 5, at 49.
134. Id.
135. Id. at 46, 49; DASCHLE, supra note 6, at 71.
Spring 2010
The Independent Medicare Advisory Committee
259
HMOs pushed for hospital discounts and rewarded doctors for
keeping costs down.136
3. Backlash
In a sense, managed care was the panacea to the health care
crisis: Costs were contained and health care expenditures did not
increase as a percentage of GDP between 1993 and the end of the
decade. 3 7 Private health care spending was contained at a 2% yearly
increase in 1996 (after the "backlash" against managed care, this shot
up to 9.6% by 2002).138 During the 1990s, hospital spending
dropped.139 Despite horror stories that surfaced about denials of lifesaving care, many have argued that HMOs did not fail for lack of
quality.140 To some extent, free-market reformists and single-payer
advocates agree on this point.141
Likewise, both sides would agree that consumers felt that
managed care took medical decisions out of the hands of patients and
doctors, placing these decisions in the hands of HMO
administrators. 142 Patients were kept from seeing specialists and
often had to give up their family doctors if they were not part of the
HMO network.143 Doctors were outraged by HMO cost-cutting
practices and sued HMOs to make their decisions more
Free-market reformists further emphasize the
transparent.'"
changing consumerist attitudes as a catalyst for the HMO backlash. 145
136. GRATZER, supra note 5, at 49-50. Gratzer refers the HMO strategy of
"selective contracting," using their buying power to push doctors and hospitals for
discounts. Id. Doctors were rewarded for not referring patients to specialists. Id.
137. Id. at 51.
138. Id.
139. Id. at 52.
140. Id. at 53-54. Gratzer asserts that, despite sensational media stories about
denials of care and poor quality health services, the quality of care did not
generally suffer under HMOs. Id.
141. See, e.g, id.; DASCHLE, supra note 6, at 70-71. Senator Daschle writes
that, initially, HMOs worked. DASCHLE, supra note 6, at 70-71.
142. See, e.g., id.; GRATzER, supra note 5, at 55-57.
143. DASCHLE, supra note 6, at 70-7 1.
144. Id.
145. GRATZER, supra note 5, at 55-57. Gratzer refers to the HMO system, and
the structure of health care in America, as paternalistic, contrasting it from other
260
Journal of the National Association of Administrative Law Judiciary
30-1
The growth of the Internet corresponded to the dawn of the
Information Age and a boon to health care consumers. 4 6 Americans
are no longer passive recipients of health services; they self-prescribe
over the counter drugs, they find answers on WebMD, and they enter
their doctors' offices researched and prepared.147 As effective as
HMOs were at containing costs, HMOs restricted choice; employers
unilaterally enrolled their employees, and employees were left
accepting a health care regime they had not chosen.14 8 In Dr.
Gratzer's view, "American health care is being reshaped by
consumerism-and HMOs ran contrary to that trend." 49
areas of consumer life that are highly individualized. Id. at 55. Yet, according to
Howard Dean, former Governor of Vermont, "[t]here is no such thing as an
informed consumer of health care." Id. Gratzer argues that Dean's attitude reflects
America became
precisely what brought down the popularity of HMOs.
increasingly consumer-savvy in the health-care market and was no longer willing
to accept health-care decisions being made by disinterested HMO bureaucrats. See
id.
146. See GRATZER, supra note 5, at 55-57; see also GOODMAN, supra note 8,
at 180. Goodman writes that prior to 1997, The National Library of Medicine
charged users to search its database of medical information and processed about
seven million searches per year. GOODMAN, supra note 8, at 180. After 1997, it
began hosting a free-access website for medical information in 1997 which
received 180 million searches per year within the first two years. Id The general
public made one-third of these searches. Id. Goodman also notes that an FDA
decision to let pharmaceutical companies advertise on radio, print and television
without lengthy side-effects descriptions also contributed to increase consumer
awareness of medical products on the market, removing doctors from their
"gatekeeper" position. Id. Goodman clarified that drug manufactures still must
provide a great deal of information on the packaging and that the FDA strictly
limits claims that can be made. Id. Still, a concern has been raised that direct-toconsumer advertising also fuels demand for unnecessary drugs. E.g., GRATZER,
supra note 5, at 56; DASCHLE, supra note 6, at 9.
147. See supra notes 145-146 and accompanying text.
148. GRATZER, supra note 5, at 56. Gratzer argues that Americans did not
have a choice about buying into HMOs. Id. Gratzer further emphasizes that
regardless of health care quality it is the empowerment to make personal health
decisions which health care consumers value. Id. American consumers, Gratzer
argues, rejected the "paternalism" of HMOs. Id. at 57.
149. Id. at 56. Between 1997 and 1999, enrollment in Aetna insurance grew
from 13 million to 21.1 million as it became the dominant HMO provider. Id. at
49-50. Today, however, it is again at approximately 13 million enrollees. Id.
Spring 2010
The Independent Medicare Advisory Committee
261
G. One More Time: Clinton's Stab at Health Care Reform
1. Managed Competition
By 1992, three health care reforms were before Congress: (1) a
single-payer plan; (2) free market reforms to expand private
insurance; and (3) a "play-or-pay" plan.' 50 Play-or-pay requires all
employers to either purchase health insurance for their employees, or
pay taxes so that the federal government can provide the health
insurance.15 1 Campaigning for President, Arkansas Governor Bill
Clinton supported play-or-pay.15 2 Once in office, Clinton proposed a
fourth route called managed competition, in which the federal
government regulates the health insurance market in order to avoid
The
price competition among the insurance companies. 5 3
54
and
government would manage prices with community rating
create a guaranteed issue (in which all persons are covered regardless
of health status).15 s Insurers would not be allowed to set their own
prices and would only compete in their ability to provide quality
health services while managing their own costs in the process. 56
Like Truman before him, President Clinton's health care agenda
would prove divisive.' 57 In 1993, Clinton created an Interagency
150. DASCHLE, supra note 6, at 76-77.
151. Id.
152. Id. at 78-79.
153. Id.
154. See supranote 99 and accompanying text.
155. GOODMAN, supra note 8, at 202.
156. Id.
157. See, e.g., DASCHLE, supra note 6, at 79-81; GOODMAN, supra note 6, at
201-07. Alain Enthoven became a staunch advocate of managed competition.
GOODMAN, supra note 6, at 201. Proponents raved that managed competition's
combined doses of community rating and guaranteed issue would finally suppress
"unfettered competition" and ensure health care to every American. See DASCHLE,
supra note 6, at 80-81 (quoting a New York Times article praising managed care).
Daschle, who represented North Dakota in the Senate in the 1990s, writes that he
supported managed competition because it appeased Republicans who opposed
play-or-pay's taxation scheme while ultimately laying the groundwork for
universal health coverage. Id. at 79. Campaigning for president, Bill Clinton
proclaimed that managed care would maintain consumer choice, control cost and
improve quality, and the federal government would not have to "bankrupt the
262
Journal of the National Association of Administrative Law Judiciary
30-1
Health Care Task Force, chaired by First Lady Hillary Clinton, to
develop a comprehensive health care reform bill. 58 The Clintons
developed a plan that would have subsidized the unemployed and
small businesses to buy health insurance from regional managed
taxpayers to do it." Id. Economist John Goodman, however, criticizes managed
competition for its illusory definition of competition. See GOODMAN, supra note 8,
at 201-02. Goodman writes that managed competition would be a market in which
the rules of competition are set by the government. Id. Insurers would not be
allowed to compete on terms such as pricing and risk management; rather, they
would only compete in their respective abilities to provide health care services. Id.
Consumers would be choosing their insurance simply based on which doctors'
networks they would be able to utilize. Id. Insurers would not be able to offer
more medical services at higher prices and expensive services offered to high-risk
customers would become a strain on resources. Id. In such a system, the only
business incentive left for insurers is to avoid high-risk customers, thereby avoiding
high expenses. Id. Goodman asserts that where normal competition in pricing
exists, incentives are created for sellers to compete for buyers by creating "buyerpleasing" strategies. Id Thus, insurance companies will normally provide services
for high-risk customers. Id. However, insurers will discourage expensive, highrisk customers if the incentives that come with competition are taken away. Id.
Goodman also criticizes community rating. Id. at 207. Community rating requires
the healthy to pay more than the cost of the services they expect to use and the
unhealthy to pay less than the cost of the services they expect to use. Id. The idea
is that the healthy subsidize the unhealthy, creating a financial equilibrium so that
enough funds are contributed to pay for everyone in the community. Id. But
Goodman asserts that where prices are kept "artificially low" (such as they would
be for unhealthy customers), sellers of goods and services will allow those goods
and services to degenerate to the point where the cost to the seller equals, dollarfor-dollar, the expected return. Id. In a normal market, competition causes
consumer prices to equal average cost by the seller. Id. at 206. But under
community rating when the premium price is constrained to an artificial level, the
cost which the insurers input will decrease so that it equals that artificial premium
price. Id. This would cause the number of high-cost services offered to diminish.
Id. at 207. Goodman compares the situation to rent control laws, which force
landlords to keep rent low, in turn causing the landlords to let the housing quality
deteriorate until the landlord's cost equals rent received. Id. Thus, Goodman
explains, insurance firms will have a strong interest in over-providing low-cost,
superfluous health services which attract healthy customers (inexpensive patients)
and under-providing high-cost services which unhealthy customers (expensive
patients) may require. Id. Health insurance companies might have a profitable
incentive to offer health club memberships and cheap vaccinations; but, as Alain
Enthoven admits, "[a] good way to avoid cancer patients is to have a poor oncology
department." Id. at 203-04. In essence, Goodman submits that community rating
causes avoidance of high-cost, unhealthy patients. Id.
158. DASCHLE, supra note 6, at 84.
Spring 2010
The Independent Medicare Advisory Committee
263
competition alliances, with global budget caps on hospitals to contain
prices.1 59 The plan would have included an employer-mandate to
finance the program through taxes.' 60 Insurance companies and
Republican lawmakers opposed the employer-mandate and
Many Democrats splintered from the
community rating.161
President's agenda and supported a pure single-payer reform bill. 162
Also, like with Truman, public support nose-dived. 163
159. Id. at 80, 84.
160. Id. at 84.
161. Id. at 90-97. Daschle chronologically details the events of 1993 and
1994, from the initiation of the task force in the spring of 1993, to President
Clinton's address to a joint session of Congress in fall, to the stunning opposition
campaign that lasted throughout the spring of 1994. Id. He suggests that public
support dropped as details of the bill's content became public and opponents
lambasted the number of new regulations and administrative councils in the bill.
Id. at 90. He further asserts that the bill was highly technical and complex, thus
allowing opponents to attack the details of the bill. Id. at 90-95. However, Daschle
also suggests that President Clinton's preoccupation with events in Somalia, which
caused him to cancel several health-care speeches, gave opposition "time to
mobilize." Id. at 89. He further notes that unions were peeved with the president
due to his support for the North American Free Trade Agreement. Id. 93-94.
Finally, in another of what appears to be an alternative reason for the reform
effort's ultimate failure, Daschle argues that more liberal members of the
President's party decided to support a single payer health care bill, thus splintering
support among Democrats. Id.
162. Id. at 96.
163. Id. at 97. From September 1993 to March 1994, opposition to the
Clinton reform rose from 18% to 45%. Id. In October 1993 alone, supporters
outnumbered opponents by 32% at the beginning of the month; but by month's end
the gap shrunk to 12%. Id. at 89. While Senator Daschle again raises the criticism
that opponents played politics with the cry of 'socialized medicine,' Daschle
himself is unsettled on the reason the Clinton reform ultimately failed. See id. at
90-94. He admits that leaking details of the complex, 1,300 page bill, which
created more than ninety new administrative agencies, caused citizens to become
mired in the niceties. Id. at 90, 94. He laments that while everybody agreed reform
was needed, "few groups were willing to tolerate provisions that might harm them,
to swallow new regulations, or to sacrifice some profits for the greater good." Id.
at 99. However, Daschle opposes the explanation that it was the substance of
Clinton's reform which killed the reform effort. Id. at 109. Daschle writes that
because the details of the reform were made public, the bill was targeted by the
right who thought the bill was overly generous and by the left who thought it was
not generous enough. Id. Daschle maintains, however, that while the lengthiness
and complexity of the bill made it a target, it was not the substance which caused
the bill to fail. Id. Moreover, he writes, Republican Governors of Massachusetts
264
Journal of the National Association of Administrative Law Judiciary
30-1
III. MEDICARE: HOW THE PROGRAM CURRENTLY CURTAILS COST
A. The MedicareAppeals Process
1.
The Administration of Medicare
Procedures Act
and the Administrative
The Administrative Procedures Act (APA) requires that persons
subject to a federal agency be given notice of all substantive rules
promulgated by the agency, and that all interested parties be given an
opportunity to respond.164 An Administrative Law Judge (ALJ) shall
be appointed to conduct hearings pursuant to controversies between
agencies and persons who are subject to it. 165 The ALJ, however,
remains subject to the agency's rules.166 Under APA, federal courts
are compelled to uphold all administrative decisions unless they are
"arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law."' 67 The courts must still defer to an agency's
construction of its own regulations.' 6 8
The notice and comment requirement applies to substantive and
not interpretative rules.169 Interpretative rules, "merely explain, but
do not add to, the substantive law," while substantive rules "create
rights [and] impose obligations."' 70 Exemptions to the notice and
comment requirement are narrowly construed and reluctantly
and California would both endorse managed care within the next decade. Id. at
110. In his analysis, President Clinton waited too long after assuming office to
push the reform. Id. Clinton assumed office in January 1993, initiated his task
force in May and gave his speech to a joint session of Congress in September. Id.
at 84. Also, by not attaching it to the annual budget, the health care bill was
susceptible to filibuster in the Senate. Id. at 110. Budget bills are time-limited and
filibuster-proof. Id. Daschle argues that the issue is so important that the bill ought
to be attached to the annual federal budget, despite assertions that this violates
Senate protocol. Id. at 110, 196-97.
164. See 5 U.S.C. § 554(a) (2006).
165. See id. § 556(c) (2006).
166. See id.
167. See id. § 706 (2006).
168. See Lyng v. Payne, 476 U.S. 926, 939 (1986).
169. See Erringer v. Thompson, 371 F.3d 625, 630 (9th Cir. 2004).
170. See Hemp Indust. Ass'n v. DEA, 333 F.3d 1082, 1087 (9th Cir. 2003).
Spring 2010
The Independent Medicare Advisory Committee
265
countenanced.' 7 ' The notice and comment requirement is designed
to ensure fair treatment of persons affected by the agency's
substantive rules and to allow affected persons to participate in the
rule-making process. 7 2
The federal government provides health care for the poor and
elderly under Medicaid and Medicare, respectively. Under Medicare
parts A and B, the Centers for Medicare and Medicaid Services
(CMS) currently has the legal power to deny reimbursements for
items and services that are not "reasonable and necessary for the
diagnosis or treatment of illness or injury."' 73 Citizens, however,
have a right to appeal all decisions about their Medicare services.' 74
The Medicare Act does not define reasonable and necessary. Rather,
it is left to the Office of the Secretary of Health and Human Services
(the Secretary) to determine whether claimants are entitled to benefits
"in accordance with regulations prescribed by him."' 7 5
171. See, e.g., Environmental Defense Fund, Inc. v. Gorsuch, 713 F.2d 802,
816 (D.C. Cir. 1983) ("Any claim of exemption from APA rule making
requirements will be narrowly construed and only reluctantly countenanced"
(quoting American Federation of Government Emp. v. Block, 655 F.2d 1153, 1156
(D.C. Cir. 1981)).
172. See, e.g., Chocolate Mfrs. Ass'n of U.S. v. Block, 755 F.2d 1098, 1103
(4th Cir. 1985) ("the purpose of notice-and-comment procedure [in administrative
rule making] is both to allow agency to benefit from the experience and input of the
parties who file comments ... and to see to it that the agency maintains a flexible
and open-minded attitude towards its own rules . . ." (quoting National Tour
Brokers Ass'n v. United States, 591 F.2d 896, 902 (D.C. Cir. 1978))).
173. 42 U.S.C. § 1395y(a)(1)(A) (2006); see also Michael F. Cannon, Sorry
Folks, Sarah PalinIs (Partly)Right, Detroit Free Press, Aug. 19, 2009, availableat
http://cato.org/pub_display.php?pubid=10467 (describing the Medicare appeals
process). Cannon, director of health policy studies at the Cato Institute, writes that
this statutory authority for the CMS to deny coverage based on the reasonable and
necessary standard is weak do to political resistance from the medical industry.
Cannon, supra. Cannon asserts that IMAC is intended to circumvent this political
resistance by leaving it to IMAC to reform Medicare by choosing which
reimbursements will be covered. Id. Unlike the CMS, IMAC would be an
independent board of presidential appointees, granted with a much higher degree of
autonomy than the CMS. Id.
174.
Medicare
Appeals
and
Grievances,
http://www.medicare.gov/basics/appeals.asp
(follow
"Medicare
Appeals"
hyperlink; then follow "Appeals and Grievances" hyperlink).
175. 42 U.S.C. § 416 (i)(2)(E)(f).
266
Journal of the National Association of Administrative Law Judiciary
30-1
Medicare is administered by the CMS (formerly known as the
Health Care Financing Administration (HCFA)), which contracts
with private insurance companies.' 76 These Medicare contractors act
as financial intermediaries between the CMS and Medicare
beneficiaries, and they process all Medicare claims and appeals. 77
The contractors can rely on National Coverage Determinations
(NCDs) in their decisions to deny or approve reimbursements for
medical services.' 7 ' The Secretary develops NCDs, defining services
that are not reasonable and necessary.' 7 9 Medicare contractors can
rely on NCDs, but must still uphold the reasonable and necessary
standard when denying claims for services that have been yet to be
evaluated.'
For such claims, the contractors can rely on Local
Coverage Determinations (LCDs), developed with the guidance of
the Secretary.' 8 1 Unlike NCDs, LCDs are not substantive laws and
are thus not subject to APA.1 82
176. Erringer,371 F.3d at 627.
177. Id.
178. Centers for Medicare and Medicaid Services: Medicare Coverage
Determination Process, http://www.cms.hhs.gov/DeterminationProcess/ (follow
"Medicare" hyperlink; then follow "Medicare Coverage Determination Process"
hyperlink); see also http://www.cms.hhs.gov/FACA/02_MEDCAC.asp (follow
"Regulations and Guidance" hyperlink; then follow "Federal Advisory Committee
Act (FACA)" hyperlink; then follow "Medicare Evidence Development and
Coverage Advisory Committee" hyperlink). The Medicare Evidence Development
and Coverage Advisory Committee (MEDCAC) provides expert clinical advice to
the CMS in its development of NCDs. Id. MEDCAC is subject to the Federal
Advisory Committee Act (FACA). Id.
179. Erringer,371 F.3d at 627.
180. Id
181. Id. The Secretary issues frequent guidelines to the contractors on how to
develop LCDs. Id. LCDs merely interpret the reasonable and necessary language
of the Medicare Act. Id. at 630. Thus, it is the Medicare Act that creates the
substantive law which the LCDs merely interpret. Id. LCDs are therefore not
subject to the promulgation requirement under the APA because the guidelines
creating the LCDs do not carry the force of law. Id.; see also 5 U.S.C. § 553(b)-(c)
(2006). The court noted that the APA's notice and comment requirement applies to
substantive rules passed by the CMS, prior to promulgation. Erringer,371 F.3d at
629.
182. See supra note 183 and accompanying text.
Spring 2010
The Independent Medicare Advisory Committee
267
2. The Appeals Process
An appeal can be made to the CMS and then to a hearing before a
Social Security Administration (SSA) ALJ if the claim exceeds $100
and is not reviewable unless it exceeds $1,000." Under Part B, an
appeal can be made to the Medicare contractor, then to a Medicare
hearing officer for claims exceeding $100, and then to an ALJ.184
Most appeals are granted without reaching an ALJ; about .09% of
Part A claims reach an ALJ and 1.25% of Part B claims reach an
ALJ.1 85
183. 42 U.S.C. § 1395ff (2006).
184. Id.
185. See Erringer,371 F.3d at 628; see also Hospital Insurance Benefits, SSR
76-26A, 1981 WL 387986 at *4, S.S.A. (1981); but see Wilkins v. Sullivan, 889
F.2d 135 (7th Cir. 1989). In one hearing before the SSA Appeals Council, the
council held that a hospital's efforts to rehabilitate a patient who experienced a
sudden onset of aphasia and right-sided hemiplegia were reasonable and necessary
thus reimbursable under Medicare. Hospital Insurance Benefits, SSR 76-26A,
1981 WL 387986 at *4, S.S.A. (1981).
Aphasia is a condition in which the patient's language modality is impaired,
and hemiplegia is a condition in which half the body is paralyzed. Id. at *2. The
patient was given a poor prognosis and remained inpatient for a rehabilitation
period lasting two months receiving daily speech therapy. Id. at *1-3. The
patient's progress was slow, but steady. Id at *2-3. In less than two weeks
improvements were being made in the patient's speech functions. Id. Steady
progress also occurred with respect to the patient's mobility which also required
intensive physical therapy. Id. Upon discharge the patient was able to feed herself,
though she still required assistance bathing, dressing and being pushed in her
wheelchair. Id. at *3. The council reasoned that where a patient requires a
"coordinated team approach" for physical rehabilitation, if only in order to achieve
a "reasonable level of independence with activities of daily living," such services
are reasonable and necessary under Medicare. Id. Still, denied Medicare
reimbursements are not exactly creatures of mythology, especially where the
claims involve "novel surgical procedures that may relieve pain and suffering."
See Wilkins, 889 F.2d at 141. In Wilkins v. Sullivan, an appeal was made against
the Secretary for the denial of a bilateral carotid body resection surgery (BCBR).
Id. at 136. The court denied the appeal, holding that the Secretary's denial was not
unreasonable, arbitrary or capricious. Id. at 140. The appellant suffered from
chronic obstructive pulmonary disease, brought on by emphysema, and underwent
a BCBR. Id. at 137. A BCBR consists of removing structures that control the
diameter of the bronchial tubes from the neck to relieve shortness of breath. Id.
The Secretary had decided that Medicare would not cover BCBRs. Id. The
Secretary relied on a HCFA ruling, which held that BCBRs lack medical efficacy.
Id. The HCFA had been advised by the USPHS and the National Heart, Lung and
268
Journal of the National Association of Administrative Law Judiciary
30-1
3. Hays v. Sebelius
Recently, the D.C. Court of Appeals held that Medicare
unequivocally covers "items and services."' 86 In Hays v. Sebelius,
589 F.3d 1279 (D.C. Cir. 2009), the court held that reimbursements
for items and services are subject only to the reasonable and
necessary standard.18 7
The Secretary had directed Medicare
contractors to apply the "least costly alternative" method for drug
reimbursements.' 8 8 In 2008, four Medicare contractors concluded
that treating patients with obstructive pulmonary disease (OPD) with
a combined dosage of two drugs lacked medical necessity, and began
to reimburse for the least expensive of the component drugs.' 8 9 A
Medicare beneficiary receiving the combined dose contended that the
least costly alternative method was inconsistent with the Secretary's
power to only deny items and services that are not reasonable and
necessary. 190 The Secretary responded that Medicare may "partially
cover an item or service, declining to reimburse expenses associated
with the marginal difference in price between a prescribed item or
service and its least costly and medically appropriate alternative."l 9 1
The court rejected the least costly alternative method, and held that
the Secretary's ability to approve or deny coverage items and service
Blood Institute, whose advice was based on the findings of a panel of medical
experts, that persons with obstructive pulmonary disease who undergo BCBR are at
a heightened risk of hypoventilation (a reduction in the rate and depth of
breathing). Id. The appellant asserted that the physical relief he experienced after
the BCBR was proof that the Secretary's decision was arbitrary and capricious. Id.
at 140. The court responded that while pain relief is a significant outcome, the
appellant's emphysema was not cured and possible pain relief should not come at
the expense of potential harm. Id. The court reasoned that "[i]t is precisely this
type of decision-made within the context of an extremely technical and complex
field-that courts should leave in the hands of expert administrators." Id.
186. Hays v. Sebelius, 589 F.3d 1279, 1282 (D.C. Cir. 2009).
187. Id.
188. Id. In other words, treatments would be reimbursed only up to the price
of their "reasonably feasible and medically appropriate" least costly alternatives.
Id. at 1280.
189. Id. at 1282. DuoNeb provides a combination albuterol sulfate and
ipratropium bromide in a single dose. Id.
190. Id.
191. Hays v. Sebelius, 589 F.3d 1279, 1281 (D.C. Cir. 2009).
Spring 2010
269
The Independent Medicare Advisory Committee
is purely binary.19 2 This decision is already being seen as further
affirmation of Medicare's liberal reimbursement regime. 9 3
B. MedicarePayment Advisory Commission
In 1997, Congress established the Medicare Payment Advisory
Commission (MedPAC), an independent advisory committee that
advises the Congress on Medicare related issues. 194 MedPAC issues
two annual reports analyzing and making recommendations to
improve Medicare payments, services, quality of care and access to
care. 195 The Comptroller General appoints seventeen members to
three-year terms, with backgrounds in health care, economics and
public policy.' 96
Two annual reports containing detailed
recommendations for cutting Medicare costs are submitted to the
Congress.19 7 Many, including Peter Orszag, director of the Office of
Management and Budget (OMB), Senator Max Baucus (co-author of
a Senate version of the current health care bill), Senator Jay
Rockefeller, and the late Senator Edward Kennedy have expressed a
strong interest in expanding MedPAC's power, by establishing an
independent Medicare board charged with curtailing Medicare
expenditures.1 98
192. Id. at 1283.
193. Id In Hays, the court rejected the government's application of costeffectiveness, broadening the scope of what Medicare must cover, and limiting
what HHS can deny. Id. Senator John Cornyn views the Obama administration's
failed attempt to deny reimbursements for items and services as a prelude to IMAC.
See Scott Gottlieb & John Cornyn, Ration With Caution, AMERICAN ENTERPRISE
INSTITUTE
FOR
PUBLIC
POLICY
RESEARCH,
Dec.
3,
2009,
http://www.aei.org/article/101386. Cornyn cites a recent study by the United
States Preventative Services Task Force (USPST), which has declared that women
under age fifty do not need to undergo mammograms. Id. Comyn asserts that costeffectiveness played a major role in USPST's decision and that instituting
additional government councils will lead to more denials of treatment based on
cost-effectiveness. Id.
194. 42 U.S.C. § 1395b-6 (2006); see also MedPAC: Advising the Congress
on Medicare Issues, http://www.medpac.gov (follow "About MedPAC" hyperlink).
195. Supra note 194 and accompanying text.
196. Id
197. Id.
198. Letter from Peter Orszag, Director of Office of Management and Budget
(OMB), to Nancy Pelosi, Speaker of the House of Representatives (July 17, 2009),
270
Journal of the National Association of Administrative Law Judiciary
30-1
IV. THE INDEPENDENT MEDICARE ADVISORY COMMITTEE
A. Statutory Provisions ofIMA C
Section 3403 of House Resolution 3590, titled the "Patient
Protection and Affordable Care Act," would amend title XVIII of the
Social Security Act by establishing an Independent Medicare
Advisory Board (alternatively referred to as IMAC).1 99 This section
constitutes more than fifty of the bill's 2,000-plus pages. IMAC's
purpose would be to "reduce the per capita rate of growth in
Medicare spending" by requiring the CMS to project its yearly
spending, so the board may form proposals to keep that projection
below "target growth rate for that year." 200 IMAC's yearly proposal
would be required to include recommendations resulting in a "net
reduction in total Medicare program spending," but must not include
"any recommendation to ration health care, raise revenues or
Medicare beneficiary premiums," or increase Medicare deductibles,
or "otherwise restrict benefits or modify eligibility criteria." 2 0 1 In
forming its proposals, IMAC must protect access to necessary and
"evidence-based" drugs and treatments. 202 The proposals cannot be
designed to result in "any increase in the total amount of the net
Medicare program spending." 203 IMAC shall submit a copy of its
proposal to MedPAC and to the President, and the President "shall"
available
at
http://www.whitehouse.gov/omb/assets/legislativeletters/Pelosi_071709.pdf.
Orszag stresses the need for a health care system which, "rewards quality [and]
restrains unnecessary costs." Id.
199. H.R. 3590, 111th Cong. § 3403 (2009). IMAC has been given numerous
names depending on the person commenting on the latest version of the legislation,
including Independent Medicare Advisory "Committee," "Council," and "Board"
respectively. E.g., Robert Pear, Obama Proposalto Create Medicare Panel Meets
with
Resistance, N.Y.
TIMES,
Aug.
13,
2009,
available at
http://www.nytimes.com/2009/08/14/health/policy/14medpac.html (referring to the
new agency as an Independent Medicare Advisory Council).
200. H.R. 3590, 11 Ith Cong. (2009).
201. Id.
202. Id.
203. Id.
Spring 2010
The Independent Medicare Advisory Committee
271
submit the proposal to Congress. 204 Congress may not consider any
bill that fails to satisfy the Medicare cost savings requirements. 20 5
IMAC shall consist of fifteen members appointed by the
President by and with the advice and consent of the Senate, with the
HHS Secretary, the Administrator of CMS (the Administrator), and
the Health Resource and Service Administrator (HRSA) serving as
ex officio, non-voting members. 206 The members shall be experts
from diverse health care and public policy related fields, and, to
avoid conflicts of interest, shall not be allowed to engage in any other
business, vocation or employment.20 7 The members shall serve sixyear terms, capped at two full consecutive terms.2 0 8
B. Will The FederalAdvisory Committee Act Apply to IMAC?
By the early 1970s, executive advisory committees numbered in
the thousands. 209 Some mechanism was needed to account for their
expenditures, usefulness, and the type of advice they provided.2 1 0 In
1972, the Federal Advisory Committee Act (FACA) was enacted to
make executive advisory committees transparent. 2 11
FACA checks the power of various private interests from gaining
illicit access to the President.2 12 It requires that no new advisory
committee be established unless by presidential authorization or by
federal statute.2 13 It further limits the duration of presidentially
established committees to two years. 2 14 Moreover, the committees
204. H.R. 3590, 11Ith Cong. § 3403 (2009).
205. Id.
206. Id.
207. Id
208. Id.
209. Steven P. Croley & William F. Funk, The Federal Advisory Committee
Act and Good Government, 14 YALE J. ON REG. 451, 460 (1997). There were more
than 3,000 executive advisory committees before FACA was enacted. Id.
210. Id. at 460-61.
211. Id. at 452 (asserting that FACA was meant to keep Congress and the
public abreast of the "number, purpose, membership and activities of groups
established or utilized to offer advice or recommendations to the President.").
212. Id.
213. Id. at 473.
214. Croley, supra note 209, at 473.
272
Journal of the National Association of Administrative Law Judiciary
30-1
must be comprised of diverse points of view-they cannot be
industry-based committees promoting their own interests. 215
Committee meetings must be open to the public, and each
committee must file timely notice of its meetings in the Federal
Register. 2 16 Interested citizens are entitled to "attend, appear before,
or file statements with any advisory committee." 2 17 The public
access and accountability requirements generally restrict the
"flexibility and spontaneity" of the committees' decisions. 2 18
1. Requirements
The most litigated aspect of FACA is "whether, when and how" a
committee becomes an advisory committee under FACA. 2 19 FACA
lays out three requirements for all committees falling under its scope:
(1) a group containing at least one person not employed by the
federal government; (2) established by Congressional statute (or
reorganization plan) or established or "utilized" by the President or
an agency; and (3) established for the purpose of supplying "advice
or recommendations" to the President or one or more agencies of the
federal government.2 2 0 Since IMAC would be established by statute,
the second prong is met.
2. The Advice or Recommendation Requirement
FACA states that committees must be established or utilized "in
the interest of obtaining advice or recommendations for the President
or one or more agencies or officers of the Federal Government. "221
First, a committee that does not provide recommendations related to
government policy is not an advisory committee under FACA.22 2
215. Id. at 464.
216. Id
217. 5 U.S.C. App. II § 10(a)(3) (2006).
218. Croley, supra note 209, at 504.
219. Id. at 472.
220. Id. at 473.
221. 5 U.S.C. App. II § 3(2) (2006).
222. Judicial Watch, Inc. v. Clinton, 76 F.3d 1232, 1233 (D.C. Cir. 1996)
(holding that a personal trust set up on behalf of the president and his wife for the
purpose of settling personal legal expenses was not subject to FACA).
Spring 2010
The Independent Medicare Advisory Committee
273
IMAC meets this criterion since its proposals will be related to
governmental policy. 22 3
Second, utilization of a committee does not extend to the "mere
subsequent and optional use of the work product." 224 The Supreme
Court has narrowly interpreted FACA so as to exclude presidential
reliance on the advice of his political party or groups that assist the
President in carrying out his constitutional obligations. 225 In Public
Citizen v. U.S. Dept. of Justice,22 6 the Supreme Court held that the
President's solicitation of advice on judicial nominees from the
American Bar Association (ABA) did not invoke FACA.2 2 7
Third, it has been held that the advice and recommendations must
be for the executive branch.2 2 8 IMAC's purpose is to reduce
223. Letter from Peter Orszag, supra note 198.
224. Sofamor Danek Group, Inc. v. Gaus, 61 F.3d 929, 933 (D.C. Cir. 1995)
(citing Pub. Citizen v. U.S. Dept. of Justice, 491 U.S. 440, 459 (1989)). According
to Justice Brenan, a straightforward reading of "utilize" would extend even to the
President's own political party, and this was surely not Congress' intent with
FACA. Pub. Citizen, 491 U.S. at 453. FACA had been established to cure the ills
of wasteful expenditure of public funds and the growing influence of biased
proposals by special interests. Id. It was not Congress' intent to "cover every
formal and informal consultation between the President or an Executive agency and
a group rendering advice." Id. The President's use of committees or bodies which
assist him in carry out constitutional powers specifically designated to the
executive, such as the appointment of judges, was not intended to fall under
FACA's scope. Id. at 467; see also Croley, infra note 297, at 469-70 (asserting that
the Court was concerned with the separation of power doctrine). In the aftermath
of Public Citizen, "utilized" is read narrowly so as not to intrude on the separation
of powers. Croley, supra note 209, at 469-70; see also Sofamor, 61 F.3d at 933
(citing Pub. Citizen, 491 U.S. at 459).
225. See supra note 224 and accompanying text.
226. Pub. Citizen, 491 U.S. 440.
227. See id.
228. California Forestry Ass'n v. U.S. Forest Serv., 102 F.3d 609, 611 (D.C.
Cir. 1996) (holding that FACA committees must be establish in the "interest of
advising" the executive branch). The Forest Service set up the Sierra Nevada
Ecosystem Project (SNEP), which submitted a study on the Sierra Nevada
ecosystem to the US Congress. Id. at 610. The Forest Service argued that because
SNEP's report was created primarily for the use of the U.S. Congress, FACA did
not apply. Id. at 612. However, the court rejected this argument since the Forest
Service itself had directed funding to SNEP's research, which the Forest Service
intended to use. Id. Congress had appropriated nearly two hundred million to the
Forest Service for the purpose of "forest research," and the Forest Service sough
Congressional direction on how to proceed. Id. at 610. Several Congressmen
274
Journal of the National Association of Administrative Law Judiciary
30-1
Medicare expenditures by requiring the CMS to project its yearly
Medicare growth rate, so that IMAC may in turn submit a proposal to
reduce the growth rate.229 The proposal shall be submitted to the
President, who "shall immediately" submit that proposal to
Congress. 23 0 The Secretary would be required to implement the
proposal unless Congress rejects the proposal within thirty days. 23 1
The lines between committees created to advise the President,
committees created to advise Congress, 232 and committees created to
advise private groups 233 are not easily drawn. While the President's
role in implementing the IMAC proposals seems passive (the
President "shall" submit the IMAC proposal to Congress for
implementation) the proposals will be formed for the express purpose
of recommending cost-savings to the Medicare program. 234 Those
proposals would be in the interest of an Executive agency, and the
agency's use of the proposal would not be merely optional.2 35
responded with letters calling for an ecosystem-wide study of the Sierra Nevada
and a report to Congress. Id. at 611. Because the study was directed at the Forest
Service's long-term management of the Sierra Nevada ecosystem, the court
concluded that SNEP was indeed an advisory committee established "in the interest
of' advising the executive branch. Id. at 611-12.
229. H.R. 3590, 111th Cong. § 3403 (2009).
230. Id.
231. Id.
232. See supranote 228 and accompanying text.
233. See Sofamor, 61 F.3d at 937. In Sofamor, the court held that a Low Back
Panel (LPB) formed by the Agency for Health Care Policy and Research (AHCPR)
was not an advisory committee subject to FACA. Id. LBP had been established to
develop clinical guidelines on treating lower back pain for the use of health care
practitioners. Id. at 931-32. However, certain provisions of the enacting statute
indicated that lower back conditions were of particular importance to the Medicare
program. Id. The appellant, a medical device manufacturer, asserted that while
LBP had been intended to advise private practitioners, LBP had the dual purpose of
advising the Secretary regarding Medicare reimbursement policies. Id. at 934. The
court was unconvinced, and held that LBP's guidelines were developed for private
health care practitioners and not for the purpose of advising the executive branch.
Id. The court asserted that although Congress might have intended that HHS would
"consult" the guidelines in setting its Medicare reimbursement policy, it does not
follow that LBP was established for the purpose of advice or recommendation. Id.
at 934-35. The "mere subsequent and optional use" by the executive branch of a
committee's work product does not trigger FACA. Id. at 933.
234. H.R. 3590, 111th Cong. § 3403 (2009).
235. See supra note 224 and accompanying text.
Spring 2010
3.
The Independent Medicare Advisory Committee
275
Exclusion of Committees Wholly Composed of Federal
Employees
FACA defines an advisory committee as excluding "any
committee which is composed wholly of full-time officers or
employees of the Federal Government." 236 IMAC shall consist of
fifteen Presidential appointees, with the Secretary, the Administrator,
and the HRSA serving ex officio. 237 "No individual," IMAC reads,
"may serve as an appointed member if that individual engages in any
other business, vocation, or employment."2 3 8 Inferably, IMAC shall
be wholly comprised of federal employees, thus, not subject to
FACA.
C. IMAC: A "FederalHealth Board"
Shortly after President Obama was elected in 2008, former South
Dakota Senator Tom Daschle became President Obama's first choice
for HHS Secretary. 239 Daschle advocates the creation of an
independent FHB, charged with the power of setting uniform,
national health-care policy, analogous to the Federal Reserve's power
to set monetary policy. 240 Daschle's FHB provides great incite into
how IMAC would operate.2 4 1
236. 5 U.S.C. App. II § 3(2)(c)(iii) (2006); see also Croley, supra note 209, at
492-93. President Clinton's Health Care Task Force became the target of a FACA
lawsuit regarding this requirement. Croley, supra note 209, at 492-93. The court
remanded the case for the lower court to determine whether "special employees," a
status assigned to forty doctors who had been working on the committee in a
temporary capacity and without compensation, were to be considered "full-time
employees." Id. However, the court did hold that First Lady Hillary Clinton was
in fact a full-time government employee for the purposes of FACA. Id.
237. H.R. 3590, 111th Cong. § 3403 (2009).
238. Id.
239. Ed Henry and Kristi Keck, Daschle Withdraws as HHS Nominee, CNN
POLITICS, Feb. 3, 2009, http://edition.cnn.com/2009/POLITICS/02/03/daschle/; see
also Feldstein,supra note 9.
240. DASCHLE, supra note 6, at xiii-xiv.
241. Id.
276
Journal of the National Association of Administrative Law Judiciary
30-1
First, the FHB would work with Medicare to create a public
option that would compete with private insurance plans.24 2 Second,
to avoid conflicts of interest, representatives serving on the board
Third, by making it
would not have outside employment.24 3
presidentially appointed, the FHB's decisions would be insulated
from politics. 2 44 Fourth, the FHB would provide only those drugs
and treatments backed by "solid evidence." 245 To this end, the FHB
would rank treatments by their "health and cost impacts." 246 Fifth,
the FHB would reward doctors for curbing costs by awarding
bonuses for patient outcomes. 24 7 It would curb costs by expending
242. Id. at 146. In its current state, the federal bill has no public option.
Many public option advocates have suggested that a public option will come to
pass eventually, regardless of the current bill. See Stephanie Condon, Dems
Commit to Health Bill, Some Push For Public Option, CBS NEWS, Jan. 27, 2010,
http://www.cbsnews.com/blogs/2010/01/27/politics/politicalhotsheet/entry6148164
.shtml; but see Michael 0. Leavitt and Jeffrey H. Anderson, The President'sTrojan
Horse,
THE
WASHINGTON
TIMES,
June
23,
2009,
available
at
http://www.washingtontimes.com/news/2009/jun/23/the-presidents-trojan-horse/
(arguing that a public option would be an incremental step toward single payer
health care). Some have argued that instituting a public option would force private
insurances out of the market, while giving employers the incentive to drop their
insurance plans and let the federal government take over the responsibility,
entirely. Leavitt, supra note 242.
243. See DASCHLE, supra note 6, at 170. Daschle stresses that the board
members should be free from professional conflicts of interest. Id.
Congress and the President would
244. See id. at xiii, 169, 200-01.
"relinquish some of their health-policy decisions to it." Id. at xiii. Daschle argues
that, while the amount of power delegated to the FHB would rightfully raise
concern, the FHB shall be transparent and accountable to elected leaders. Id. at
200-01. Still, by insulating it from political pressures, the FHB would have the
flexibility to make tough decisions. Id. at 169.
245. DASCHLE, supra note 6, at 171-72. IMAC language limits itself to
protecting "evidence-based" items and services. See H.R. 3590, 111th Cong. §
3403 (2009).
246. DASCHLE, supra note 6, at 172. Daschle criticizes the current system in
which doctors employ high-tech treatments, "when the patient would be better off
with . . . low-tech alternative[s]-or no care at all." Id. Daschle praises Britain's
NICE cost-effectiveness test for drug approvals. Id. at 172.
247. Id at 174-76. Daschle emphasizes that the FHB should curb artificial
consumer demand for expensive drugs and treatments, currently induced by directto-consumer pharmaceutical advertising. Id. at 9-11,174-75. Drug companies
advertise new drugs, which do not improve on "older, cheaper alternatives." Id. at
Spring 2010
The Independent Medicare Advisory Committee
277
more on procedures that are medically recommended and less for
procedures that are deemed discretionary.2 4 8 Sixth, Daschle calls for
the "rationalizing" of health care infrastructure, by creating a national
guide to direct health care resources efficiently.2 4 9 Seventh, Senator
Daschle envisions strong enforcement power for the FHB.25 0 Unlike
a traditional regulatory agency, the FHB's recommendations would
bind all federal programs (such as Medicare) causing private
insurance programs to follow suit. 25 1 Private insurance companies
would find it difficult to set their own rules when competing with the
federal program. 25 2 Daschle further recommends that Congress could
limit the business tax deduction for health insurance to programs that
follow the rules set by the FHB.2 53
Two crucial examples are raised throughout Senator Daschle's
analysis, which further elucidate how IMAC would operate. 254
Firstly, Daschle analogizes the FHB to the Federal Reserve System in
terms of its political insulation and authority regarding monetary
policy. 255 Secondly, Daschle raises Britain's NICE as a working
example of an independent health policy board which sets a national
health care agenda regarding which drugs and treatments shall be
covered by the national health program. 256
174. The FHB could do this by approving evidence-based treatments, considerate
of cost-effectiveness. See id. at 172-75.
248. Id. at 175-76. Daschle cites a nonprofit Minneapolis health plan, which
paid doctors bonuses if their diabetic patients met blood sugar and cholesterol
quotas. Id. A 12% increase in patients meeting the quota occurred between 1996
and 2003. Id.
249. Id. at 178 ("We have too many imaging machines in some areas and too
few emergency rooms in others.").
250. Id. at 179.
251. DASCHLE, supra note 6, at 179.
252. Id
253. Id.
254. Id. at 127-37.
255. Id. at 129-37.
256. DASCHLE, supra note 6, at 127-29.
278
30-1
Journal of the National Association of Administrative Law Judiciary
1. The Federal Reserve and the Sunshine Act
The Federal Reserve Act was passed in 1913, in order to
"incorporate under Federal control. . . . all national banks." 257 The
Federal Reserve, or the Fed, is headed by a presidentially appointed
Board of Governors, which oversees twelve privately owned
Additionally, there are numerous member banks
banks.2 58
throughout the country comprising some 40% of all federally insured
banks. 25 9
FACA expressly exempts the Federal Reserve from its scope. 2 60
However, APA requires notice and comment with regard to the Fed's
substantive rulemaking. 26 1 Additionally, the Fed is subject to the
Sunshine Act, enacted in 1976 to create openness in federal agency
proceedings. 262 The Sunshine Act, a sibling to FACA, provides that
"every portion of every meeting of an agency shall be open to public
observation." 263 The Sunshine Act requires advance notice to the
public of agency meetings. 264
257. See 12 U.S.C. § 221 (2006); see also U.S. v Davenport, 266 F. 425, 432
(W.D. Tex. 1920).
258. 12 U.S.C. § 221 (2006).
259. DASCHLE, supra note 6, at 130.
260. 5 U.S.C. App. II § 4(b)(1)-(2) (2006) ("Nothing in this Act shall be
construed to apply to any advisory committee established or utilized by .
.
. the
Federal Reserve System.").
261. 5 U.S.C. § 554(a) (2006).
262. 5 U.S.C. § 552(b) (2006); see also The Federal Reserve Board,
Government in the Sunshine: A Guide to Meetings of the Board of Governors of
System,
Reserve
Federal
the
http://www.federalreserve.gov/boarddocs/meetings/sunshine (last visited Mar. 31,
2010)..
263. 5 U.S.C. § 552(b) (2006); see also Croley, supra note 209, at 453.
264. 5 U.S.C. § 552(b) (2006). Agency meetings shall be conducted openly
(to the public) and, "notice of the time, place, and subject matter of a meeting,
whether the meeting is open or closed, any change in one of the preceding, and the
name and phone number of the official designated by the agency to respond to
requests for information about the meeting" shall be placed in the Federal Register.
Id. The meeting must be announced one week in advanced, unless the agency
members vote by majority that the agency's business requires a quicker
determination, in which case, the meeting's time and place shall be announced at
the "earliest practicable time." Id.
Spring 2010
279
The Independent Medicare Advisory Committee
Senator Daschle considers the Federal Reserve to be a transparent
body which sets monetary policy founded on evidence-based analysis
and free from political rancor.2 65 The Federal Reserve remains the
offspring of the Congress, and Congress can dismantle the Federal
Reserve, discharge a member of the Board of Governors, or overturn
a decision at any point. 266 Nevertheless, Congress has never
exploited these powers.26 7
2. Britain's National Institute for Health and Clinical Excellence
Senator Daschle states, approvingly, that NICE uses "costeffectiveness information" to determine drug coverage. 268 Daschle
stresses that the FHB must, like NICE, consider which treatments are
"clinically valuable and cost effective," in order to curb spending.269
While Daschle would not use a "hard-and-fast" cost-effective
strategy, he suggests that the U.S. must, "[n]evertheless.
.
.. look at
medical care in a different way." 270
NICE was established for the purpose of promoting clinical
excellence and the "effective use of' health care resources. 2 71 NICE
is responsible for providing guidelines as to which drugs and
treatments shall be covered under the NHS. 2 72 Its cost-effective
strategies are implemented to weigh economic considerations like
cost against the medical benefits or effectiveness of the treatment.2 7 3
In doing so, NICE relies on an independent committee of medical
experts and economists who review clinical evidence. 2 74
One mechanism relied on by NICE is the Quality Adjusted Life
Year (QALY), which measures the cost of gaining a particular unit of
265. See DASCHLE, supra note 6, at 133.
266. Id
267. Id
268. Id. at 172-75.
269. Id. at 172.
270. DASCHLE, supra note 6, at 172.
271. National Institute for Clinical Excellence (Establishment and
Constitution) Amendment Order, 2005, S.I. 2005/497, art. 3 (U.K.).
272. See, e.g., DASCHLE, supra note 6, at 127-28; GRATZER, supra note 5, at
181-82.
273. See supra note 272 and accompanying text.
274. Id.
280
Journal of the National Association of Administrative Law Judiciary
30-1
utility through the use of the technology which can be applied across
a range of treatments.2 7 5 For instance, moderate mobility impairment
is rated at 0.85 times "perfect health," thus, a patient living ten years
of moderately impaired mobility is equated to a person living in
perfect health for eight and a half years.2 76 In establishing the costeffectiveness of national health dollars to be expended, the system
requires QALYs to be maximized.2 7 7 Thus, for example, NHS
generally shall not spend more than $22,000 for treatments that
extend a life for less than six months. 278
The QALY formula is manifestly utilitarian and has scandalized
critics who feel that NICE is not so nice.279 Numerous, media
275. See, e.g., Eisai Ltd. v. Nat'l Inst. for Health & Clinical Excellence, 2007
WL 2186995, at 18 (Q.B.).
276. Govind Persad, Alan Wertheimer & Ezekiel J. Emanuel, Principlesfor
Allocation of Scarce Medical Interventions, 373 THE LANCET 423, 427-29 (2009),
availableat http://www.thelancet.com/journals/lancet/issue/current?tab=past.
277. Id.
278. See Obama's Senior Moment, WSJ.coM, (Aug. 14, 2009),
http://online.wsj.com/article/SB10001424052970203863204574344900152168372.
html; see also EisaiLtd., supra note 275 at 19.
279. See e.g., Obama's Senior Moment, supra note 278; GPs Admit to
Rationing
Care,
BBCNEWS.COM,
Jan.
20,
1999,
http://news.bbc.co.uk/2/hi/health/258558.stm; Kevn Devlin, Patients 'Demand
Refunds for Expensive Cancer Drugs' on the NHS, TELEGRAPH, Oct. 27, 2008,
http://www.telegraph.co.uk/news/uknews/3269533/Patients-demand-refunds-forexpensive-cancer-drugs--on-the-NHS.html; Nigel Hawkes, Secret NHS Plan to
Apr.
7,
2006,
Care,
TIMESONLINE,
Ration
Patient
http://www.timesonline.co.uk/tol/news/uk/health/article702894.ece; Kevin Devlin,
Ruling 'Denies Treatment to 100,000 Alzheimer's Patients',TELEGRAPH, Apr. 15,
2008, http://www.telegraph.co.uk/news/uknews/1895656/Ruling-denies-treatmentto-100000-Alzheimers-patients.html; Lewis Carter, Cancer Specialists Blame
NICE
Over
Drug
Rationing,
TELEGRAPH,
Aug.
24,
2008,
http://www.telegraph.co.uk/news/uknews/2613653/Cancer-specialists-blame-Niceover-drug-rationing.html; Kidney Cancer Patients Denied Life-Saving Drugs by
NHS
Rationing
Body
NICE,
MAILONLINE,
Apr.
29,
2009,
http://www.dailymail.co.uk/health/article- 1174592/Kidney-cancer-patients-deniedlife-saving-drugs-NHS-rationing-body-NICE.html; Kevin Devlin, Sentenced to
Death
by
NHS,
TELEGRAPH,
Sept.
2,
2009,
http://www.telegraph.co.uk/health/healthnews/6127514/Sentenced-to-death-on-theNHS.html. In 2008, it was reported that NICE had denied 100,000 Alzheimer's
patients certain medications as it had been determined that E2.50 per day was too
expensive for patients whose condition had not deteriorated. Devlin, Ruling
'Denies Treatment to 100,000 Alzheimer's Patients'supranote 279. Another story
Spring 2010
The Independent Medicare Advisory Committee
281
expos6s in the British press have attacked QALYs and other NICE
rationing polices.2 80 American critics of the QALY system include
Dr. Ezekiel Emmanuel, a bioethicist from Harvard Medical School
and Special Advisor for Health Policy to Peter Orszag of the
OMB. 28 1 Emmanuel has stressed that QALYs, in their attempt to
curb costs, ignore fair distribution of health care resources and does
not encompass the moral goals of prioritizing the medically needy,
treating individuals equally and saving the most lives.2 82 Dr.
Emmanuel has, however, advocated for "comparative effectiveness"
of treatments. 283
D. Rationing
Dr. Emmanuel has come under controversy for his views on
euthanasia.2 84 Although opposed to legalizing euthanasia, he once
reported that NICE guidelines aimed to help medical practitioners deal with dying
patients by removing fluids and drugs and placing the patients on continuous
sedation until they pass. Devlin, Sentenced to Death by NHS, supra note 279.
Between 2007 and 2008, continuous sedation accounted for 16.5% of deaths in
Britain (double the proportion for Belgium and Netherlands). Id. While NICE
instituted the program to ease suffering in the patients' final hours, critics have
argued that sedation can mask possible signs of the patients' improvement. Id.
NICE also denied approval for a kidney cancer drug, which would cost E24,000 per
patient, per year. Kidney Cancer Patients Denied Life-Saving Drugs by NHS
Rationing Body NICE, supranote 279.
280. See supra note 279 and accompanying text.
281. Emanuel, supra note 276, at 427-29. Emanuel has also advocated
eliminating employer-provided health care and replacing it with health care
vouchers funded by a national value added tax, which would phase out Medicare
and Medicaid. Ezekiel J. Emanuel & Victor R. Fuchs, Getting Covered: Choose a
Plan Everyone Can Agree With, BOSTON REVIEW, Nov.-Dec. 2005,
http://www.bostonreview.net/BR30.6/emanuelfuchs.php. Still, Emanuel does not
support a single-payer health care system. Emanuel, supra note 281. Indeed,
Emanuel admits that a single-payer system would be inefficient and would lead to
rationing. Id.
282. Emanuel, supra note 276, at 428.
283. See Betsy McCaughey, Obama'sHealth Rationer-in-Chief WALL ST. J.,
2009,
27,
Aug.
http://online.wsj.com/article/SB 10001424052970203706604574374463280098676.
html.
284. See Robert Pear, A Hard-ChargingDoctor on Obama's Team, N.Y.
at
A14,
available
at
17,
2009,
Apr.
TIMES,
282
Journal of the National Association of Administrative Law Judiciary
30-1
evaluated the cost-effectiveness that physician-assisted suicide might
have on health care expenditures. 2 85 Presidential advisor Robert
Reich has also indicated his attraction to rationing health care. 286 in
2007, addressing students at the University of California Berkeley,
Reich quipped that he would advise a candidate for the presidency,
advocating for health care reform, to be honest and explain to
Americans that "if you're very old, we're not going to give you all
that technology and all those drugs for the last couple of years of
your life to keep you maybe going for another couple of months. It's
too expensive . . . so we're going to let you die." 28 7 Reich went on,
advocating that an ideal health care reform would:
[U]se the bargaining leverage of the federal
government in terms of Medicare, Medicaid-we
already have a lot of bargaining leverage-to force
drug companies and insurance companies and medical
suppliers to reduce their costs. What that means, [is]
less innovation and that means less new products and
less new drugs on the market which means [young
Americans] are probably not going to live much
longer than [their] parents.28 8
Reich and Emmanuel do not represent mere anecdotes. To wit,
the enforcement powers of Daschle's FHB would be derived from the
http://www.nytimes.com/2009/04/18/us/politics/18zeke.html?_r-1. Emanuel was a
vocal opponent of legalizing euthanasia. Id. Yet, Emanuel has been an oft-cited
authority on the potential cost-savings of legalizing euthanasia. Ezekiel J. Emanuel
& Margaret P. Battin, What Are the Potential Cost Savings from Legalizing
Physician-AssistedSuicide, 339 NEW ENG. J. MED. 169, 169-72 (1998), availableat
http://content.nejm.org/cgi/content/full/339/3/167.
Emanuel concluded that the
potential cost-savings of legalizing physician-assisted suicide are lower than many
proponents have suggested. Id.
285. See supra note 284 and accompanying text.
286. Obama's Transition Economic Advisory Board, N.Y. TIMES, Nov. 7,
2008, http://www.nytimes.com/2008/11/08/us/politics/08advisors.html.
The
former Labor Secretary served on an elite Transition Economic Advisory Board for
President Obama. Id.
287. Id
288. Id
Spring 2010
The Independent Medicare Advisory Committee
283
FHB's bargaining power. 289
Daschle argues that the federal
government must "exert tremendous leverage" in choosing the drugs
and treatments it will reimburse, steering providers to those which
are, "the most clinically valuable and cost-effective, and dissuade
them from wasting time and money on those that are neither." 290
Daschle says he opposes a strict cost-effectiveness regime like
NICE. 29 1 However, some have argued that Daschle's FHB proposal
is patently designed to ration health care resources.2 9 2 Some argue
that any expansion of federal financing of health care would require
rationing mechanisms in order to rein in costs. 293 IMAC is intended
to reduce the growth rate of Medicare. 294 The FHB, applying a
NICE-style cost-effectiveness strategy, would need to weigh the cost
of a given treatment against the treatment's overall economic benefit
(how much Medicare will save).29 5
Although the Hays court prevented it from doing so, the CMS has
already attempted to apply a "least costly alternative" method for
evaluating reimbursements.2 9 6 The CMS is powerless to refuse
judicial review of the reasonable and necessary standard, whereas
IMAC will not be subject to the reasonable and necessary standard.
IMAC will not simply approve or deny reimbursements, but it will
evaluate medical evidence with deference to cost-effectiveness in
order to reduce the growth rate of Medicare expenditures.297
Nevertheless, the bill states that rationing measures cannot be
utilized.29 8 But economist John Goodman contends that rationing is a
289. DASCHLE, supra note 6, at 179.
290. Id. at 158.
291. Id. at 172.
292. See, e.g., Feldstein, supra note 9; Sally C. Pipes, Obama Will Ration
Your Health Care, WALL ST. J., Dec. 30, 2008, at Al l, available at
http://online.wsj.com/article/SB123060332638041525.html.
293. See, e.g., Jim Angle, Medicare's Popularity Defies Need to Cut
Spending,
FOxNEWS.COM,
Feb.
3,
2010,
http://www.foxnews.com/politics/2010/02/03/medicares-popularity-defies-needcut-spending/. The current bill seeks to cut about $500 billion from Medicare. Id.
294. H.R. 3590, 111th Cong. § 3403 (2009).
295. See DASCHLE, supra note 6, at 171-74.
296. Hays v. Sebelius, 589 F.3d 1279 (D.C. Cir. 2009).
297. H.R. 3590, 111th Cong. § 3403 (2009).
298. Id.
284
Journal of the National Association of Administrative Law Judiciary
30-1
necessary outcome of government provided health care.2 9 9 If health
care was "free" at the point of delivery, people would want to obtain
every health care service possible "so long as it [has] any value to
them." 30 0 Unconstrained, consumers would have the incentive to
utilize every service the health care system provides up to the point
that the costs outweigh the value returned.3 0 ' If the cost of services
are artificially decreased or subsidized entirely by a third party (such
as by an employer or the federal government), there is theoretically
no rational limit to the amount of services each patient would
consume. 302
Managed care experienced this problem, and, in response, HMOs
curbed consumer demand. 30 3 In case-by-case reviews, HMOs
utilized cost-effective strategies to determine that a patient might not
need a MRI, for example. 304 Goodman argues that in national health
care systems where the government is the sole provider of services,
obstacles must be placed between consumers and the services they
are seeking in order to curb costs. 3 05
However, single-payer health care systems do not curb demand
(as HMOs do), but, instead, they curb supply. 306 Goodman writes
that in Canada the government does not need to micromanage the
decisions of doctors as HMOs do. 30 7 Rather, by limiting the number
of MRI machines in a given region, patients are placed in waiting
lines and precluded from over-burdening and overcharging the
system. 308 Canada has one-third the amount of MRI units per capita,
compared to the U.S., and ranks last in terms of access to advanced
medical technology out of twenty-nine Organization for Economic
Cooperation and Development (OECD) nations. 309
299.
300.
301.
302.
303.
304.
305.
306.
307.
308.
309.
See GOODMAN, supra note 8, at 2-5.
Id. at 2 (emphasis added).
Id.
Id. at 2-3.
Id.
GOODMAN, supra note 8, at 2-3.
Id.
Id.
Id.
Id.
GOODMAN, supra note 8, at 63.
Spring 2010
The Independent Medicare Advisory Committee
285
The current health care bill would do little to alter the basic
structure of Medicare or the CMS appeals process. Medicare
beneficiaries would enjoy the same right of appeal treatment denials
as they do now. 3 10 However, IMAC shall be in the position of
research and testing drugs and treatments, and its recommendations
shall be instituted by Congressional implementation. The reasonable
and necessary standard for Medicare reimbursements would remain
in place, but IMAC's proposals would not be subject to it.31 1 IMAC
does not circumvent the reasonable and necessary standard; rather, it
preempts the standard by limiting the drugs and medical treatments
that the national health plan will be able to provide. 3 12
V. DIAGNOSIS: Is HEALTH CARE IN AMERICA A FAILURE OR A
SUCCESS?
This section examines the failings and achievements of the U.S.
health care system. Often, comparisons will be drawn between the
U.S. system and single-payer systems.
The health care bills
submitted to Congress in 2009 were not single-payer reforms, nor, as
of February 2010, a public option, 3 13 which has been deemed by
310. See generally, H.R. 3590, 111th Cong. (2009). The bill section does not
purport to alter the Medicare appeals process; it focuses instead on the new powers
of IMAC.
311. Id
312. Id. Whether a drug or treatment is covered under the new health care
plan will be determined by IMAC; whether those drugs and treatments are
reasonable and necessary under Medicare would be determined after IMAC's
recommendations are put in place (IMAC proposals will be submitted for
consideration for the annual federal budget). See supra notes 199-208.
313. See Gregory Mankiw, The Pitfalls of the Public Option, N.Y. TIMES, Jan.
27,
2009,
at
BU5,
available
at
http://www.nytimes.com/2009/06/28/business/economy/28view.html
(asserting
that the AMA opposes a public option.). Harvard economist Gregory Mankiw
defines a public option as, simply put, a federal, tax-subsidized health plan. See id.
Critical of the idea, Mankiw asserts, for example, that we do not have,
"government-run grocery stores or government-run gas stations to ensure that
Americans can buy food and fuel at reasonable prices." Id. Mankiw is not an
objective observer of this issue (arguably, few, if any, objective observers exist);
however, Mankiw correctly identifies the basic structure of the public option: the
federal government collects taxes (like the Medicare payroll tax) and buys health
services for beneficiaries of the plan (like the Medicare program). See id. Free-
286
Journal of the National Association of Administrative Law Judiciary
30-1
some as mechanism that will effectively lead to a single-payer
system, 314 was in the current House version of the bill, but not the
Senate version.3"s Although it would seem simplistic to place all
market reformists declare that a public option would cause employers to dump their
employees into the public plan and individuals to flood the cheap public plan,
ultimately squeezing most private providers out of the market, leaving the public
plan as the "only game in town." See, e.g., id. At this point, the U.S. would
essentially have a single-payer health care system. See, e.g., id.; see also, infra
note 314.
314. See, e.g., The Public Option Two Step, WALL ST. J, July 10, 2009,
available at http://online.wsj.com/article/SB124709618142215031.html; but see
DASCHLE, supra note 6, at 146. Daschle advocates a public option. DASCHLE,
supra note 6, at 146. Some have suggested a public option is merely a mechanism
to force private insurers out of business, leaving the federal government as the sole
insurer of health services. See, e.g., The Public Option Two Step, WALL ST. J, July
10, 2009, available at http://online.wsj.com/article/SB124709618142215031.html.
Eventually, the system would control costs by forcing medical providers to accept
lower reimbursements. See id. This would lead to supply restrictions. See id.
315. On November 7th, 2009, the House passed its version of the health care
bill (inclusive of IMAC and a public option) by a narrow 220-215 margin. Carl
Hulse and Robert Pear, Sweeping Health Care Plan Passes House, N.Y. TIMES,
Nov.
7,
2009,
at
Al,
available
at
Thirty-nine
http://www.nytimes.com/2009/11/08/health/policy/08health.html.
Democrats voted with 176 Republican House members, who opposed the bill (only
one Republican voted for the bill). Id. A last minute amendment to prohibit funds
for the public option from being used to provide abortions made passage possible:
pro-life Democrats remained obstinate, and the amendment passed by a decisive
240-194 margin. Id. The bill was revised in the Senate, which had come up with a
bill exclusive of the public option. Huma Khan, Health Care Bill Passes Senate,
FacesNew Hurdles
in
2010,
ABC
NEWS,
Dec.
24,
2010,
http://abcnews.go.com/GMA/HealthCare/president-obama-hails-senate-healthcare-bill-republicans/story?id=9410912. That bill passed the Senate on December
24th, 2009 by a 60-39 margin. Id. Because of the amendments, the bill then had to
be resent to the House for approval. Id. At that point, sixty senators caucused with
David M.
the Democrats (fifty-eight Democrats and two Independents).
Herszenhorn and Robert Pear, Health Bill Passes Key Test in the Senate, N.Y.
TIMES, Dec. 21, 2009, http://www.nytimes.com/2009/12/21/us/21vote.html.
Republican lawmakers had been warning that they would vote in bloc to defeat the
health care bill; but with only forty votes this would have been fruitless: in the
Senate, a filibuster is the parliamentary act which halts debate on legislation;
however, when a bill's proponents have at least sixty votes, they can vote in bloc to
stop debate, break a filibuster and send the bill to a vote by simple-majority. See
id. Thus, opposition must have at least forty-one votes to stall debate and
effectively block legislation. Id. However, to complicate matters further,
Massachusetts scheduled a special election in January to fill the Senate seat of the
Spring 2010
The Independent Medicare Advisory Committee
287
health care reform proposals into two distinct schools, by doing so,
one can examine two broad types of reform-a government program
to expand and reduce cost versus private sector incentives to expand
access and reduce cost. 3 16
Daschle and others who advocate government-managed health
care have not rejected single-payer health care system as a viable
reform option.3 1 7 Indeed, Daschle writes that the highest ranked
systems in the world are single-payer. 3 18 He also declares, rather
equivocally, that a "pure single-payer system is politically
problematic in the United States, at least right now." 319 It cannot be
refuted that the current reform effort's leading advocates support
single-payer health care and incremental moves towards its
implementation. 320
late Edward Kennedy. See Charles Krauthammer, What Scott Brown's Win Means
for
the
Democrats,
WASH.
POST,
Jan.
22,
2010,
http://www.washingtonpost.com/wpdyn/content/article/2010/01/21/AR2010012103500.html. Although the state has
been known as a Democratic stronghold for decades (with registered Democrats
outnumbering Republicans three-to-one, President Obama won the state
swimmingly in 2008), Republican candidate Scott Brown took the seat by a
decisive 52% to 47% margin. Brown Scores Upset Victory Over Coakley in
Massachusettes
Senate
Race,
Fox
NEWS,
Jan.
19,
2010,
http://www.foxnews.com/politics/2010/01/19/polls-close-competitivemassachusetts-senate-race/. Brown campaigned throughout the state as the 41st
vote. See id. As of late February, the House bill remains a lame duck in the
Senate, where forty-one Republicans and several Democrats will not pass the bill.
Shailagh Murray & Michael D. Shear, Republicans 'Ready to Participate' in
2010,
POST,
Feb.
21,
WASH.
Obama's Health Care Summit,
http://www.washingtonpost.com/wpdyn/content/article/2010/02/21/AR2010022101506.html?hpid=topnews. In March,
President Obama will hold a health care summit to engage members of both parties
to develop a compromise bill; the fate of the IMAC proposal is unknown, while the
demise of the public option (at least in this Congress) appears foregone. See id.
316. See GOODMAN, supra note 8, at 217.
317. See DASCHLE, supra note 6, at 143-44. Daschle writes that he supported
President Clinton's managed competition reform because it would eventually lead
to universal coverage. See id. at 78. On single-payer health care, Daschle only
states that it would be "politically problematic. . .at least right now." Id. at 144.
318. Id. at 143-44.
319. Id. at 144.
320. See e.g., id.; Obama Touts Single-Payer System for Health Care,
WSJ.coM, Aug. 19, 2008, http://blogs.wsj.com/washwire/2008/08/19/obama-toutssingle-payer-system/tab/article/.
288
Journal of the National Association of Administrative Law Judiciary
30-1
A. The Number of Uninsured Citizens
There are approximately 300 million people living in the United
States.3 2 ' It has been said that the number of uninsured Americans
continues to increase. 322 Between 1991 and 2003, the percentage of
Americans without health insurance ranged from 14.1% (1991) to
16.3% (1998), remaining at or near the 15% mark throughout the last
decade. 323 The logical inference is that the number of uninsured is
increasing no faster than the U.S. population is increasing.
First, it has been said that approximately forty five million lack
health insurance. 324 Second, the number of uninsured Americans
fluctuates around the forty five million mark, depending on the
source, due to the fact that the Census Bureau updates this number
yearly.32 5 According to the Census Bureau, 20% are non-citizens.32 6
321. U.S. Census Bureau Home Page, http://www.census.gov (last visited
Mar. 31,2010).
322. See Milt Freudenheim, Record Level of Americans Not Insured on
Health,
N.Y.
TIMES,
Aug.
7,
2004,
http://www.nytimes.com/2004/08/27/business/27health.html?pagewanted=1
(stating that the number of uninsured Americans grew from 43.6 million to 45
million between 2002 and 2004); but see Steven Reinberg, Number of Uninsured
Americans Drops: More Children Now Covered by Government-Sponsored
Programs, Census Bureau Reports, U.S. NEWS & WORLD REPORT, Aug. 26, 2008,
http://www.usnews.com/health/managing-yourhealthcare/insurance/articles/2008/08/26/number-of-uninsured-americansdrops.html (stating that the number of uninsured Americans dropped from 47
million to 45.7 million between 2006 and 2007).
323. GRATZER, supra note 5, at 84; see also John Lott, As Obama Pushes
National Health Care, Most Americans Already Happy With Coverage, Fox NEWS,
June 24, 2009, http://www.foxnews.com/politics/2009/06/24/obama-pushesnational-health-care-americans-happy-coverage/ (citing a Census Bureau report
affirming the proposition). About 13.4% of Americans are currently uninsured.
LOTT, supra note 323. This figure is in contrast to the 15.6% 2003 Census Bureau
estimate. GRATZER, supra note 5, at 84. In coming to its estimates, the Census
Bureau surveys about 50,000 households per year. GRATZER, supra note 5, at 8485.
324. E.g., DASCHLE, supra note 6, at 3.
325. See GRATZER, supra note 5, at 84-86.
326. Id. Gratzer writes that the issues facing immigration in America are
distinct from the issue of health care. Id. The fact that immigrants are uninsured
cannot reasonably be cited as an example of a gross lack of access to U.S. health
care. See id.
Spring 2010
The Independent Medicare Advisory Committee
289
Therefore, approximately thirty six million American citizens are
uninsured.3 27 This comment takes no position on whether a national
health plan ought to cover non-citizens, but can it be said that
America's health care system has failed insofar as it has failed to
insure non-citizens? 328
Third, while the actual number of uninsured Americans is
somewhat constant from year to year, the actual individuals who are
uninsured are rapidly shifting. 329 This is due to the fact that America
has a predominantly employer-provided health care system. 33 0 Often,
when people become unemployed, they lose their insurance. 33 1 The
Congressional Budget Office (CBO) states that 74.7% of the current
uninsured will become insured within one year, 84% within two
years, and 97.5% will have insurance within three years. 332 Since the
U.S. has an employer-provided insurance model, the number of
uninsured is moot unless long-term unemployment figures are
viewed in conjunction. For instance, in 1998 the U.S. economy was
strong, while the percentage of uninsured peaked at a record 16.3%
of the population, yet the median duration of unemployment was
only seven weeks. 333
Fourth, the composition of the uninsured is increasingly middleclass, while the indigent are gaining insurance through government
327. See id.
328. See id.; see also Carl Bialik, The Unhealthy Accounting of Uninsured
Americans, WALL ST. J., June 24, 2009, at A12, available at
http://online.wsj.com/article/SB 124579852347944191.html (arguing that the
current legislation does not purport to cover any of the 6 million undocumented
immigrants, and that it is therefore misleading to suggest that "45.7 million"
persons shall gain health insurance under the current proposal).
329. See GRATZER, supra note 5, at 85. In 2003, the Congressional Budget
Office (CBO) showed that between 56.8 and 59 million were uninsured at some
point during the previous year, while between 39 and 42.6 million were uninsured
at any point in time, whereas between 21 and 31 million were uninsured for the
entire year. Id. Indeed, every five months, the total pool of uninsured Americans
has a 50% turnover in composition. See id.
330. Id. at 86.
331. Id.
332. Id.; GOODMAN, supra note 8, at 35.
333. See GRATZER, supra note 5, at 84-86. "The executive who leaves his
corner office," Gratzer writes, shall "join the ranks of the uninsured," becoming
part of the crude number of uninsured Americans that often goes unexplained by
politicians. Id. at 86.
290
Journal of the National Association of Administrative Law Judiciary
30-1
assistance.3 34 Eighteen million uninsured have annual household
incomes exceeding $50,000, and half of these individuals have
incomes over $80,000 per year. 335 The inference is that a lack of
insurance is not necessarily indicative of a lack of access to
insurance. 3 3 6
Last, many have cited the Institute of Medicine's estimate that
18,000 die each year due to lack of health insurance. 3 37 This figure is
based on numerous small studies that suggest uninsured indigents
experience poor clinical outcomes. 338 Taken together, the studies are
334. E.g., id. at 87; GOODMAN, supra note 8, at 35; but see DASCHLE, supra
note 6, at 21. Daschle asserts that since the mid 1970s, the percentage of
Americans with employer provided coverage has dropped from 70% to 60%.
DASCHLE, supra note 6, at 21. He reasons that this is due in part to a 140%
increase in the cost of health care for businesses over the past decade. Id. at 17.
However, he also asserts that 18 of the 47 million uninsured have family incomes
exceeding $50,000 per year. Id. at 4. More than half of these 18 million have
family incomes of over $80,000 per year. GOODMAN, supra note 8, at 35. The
Census Bureau reported that between 1993 and 2003, the number of uninsured
increased by 130% in households earning over $75,000 per year, but declined by
14% in households earning less than $25,000 per year. GRATZER, supra note 5, at
88. One study surveyed a group of uninsured Californians at twice the poverty
level (a group larger than persons making over $50,000 per year), with one-third
making less than $30,000 per year and 10% making over $75,000 per year. Id.
The study found that 40% were homeowners, 60% reported being in excellent
health, and the group spent an average of $200 per year on health services. Id. But
Daschle would argue that between 2000 and 2007, the cost of the average health
premium increased by 98% while the average salary increased by only 23%,
nationwide. DASCHLE, supra note 6, at 5. Moreover, medical bills are a leading
cause of bankruptcy. Id.; Medical Debt Huge Bankruptcy Culprit, CBS NEWS,
June
5,
2009,
http://www.cbsnews.com/stories/2009/06/05/earlyshow/health/main5064981.shtml.
Of all bankruptcy cases filed, 75% reported having some type of medical insurance,
and 62% of all bankruptcies are somewhat attributable to sickness. Id. Finally, it
has been asserted that one-third of the 47 million qualify for government aid
through Medicaid and State Children's Health Insurance Programs (SCHIP), but
have simply not enrolled. GOODMAN, supra note 8, at 35. Moreover, Federal law
requires emergency rooms to provide care to whoever seeks care, regardless of
financial circumstances or ability to pay. Id.
335. See supra note 334 and accompanying text.
336. Id.
337. See DASCHLE, supranote 6, at 24.
338. GRATZER, supra note 5, at 90.
Spring 2010
The Independent Medicare Advisory Committee
291
inconsistent and unclear in their findings.3 3 9 Indeed, one study
showed that the survival rate for women with breast cancer was
lower among women with Medicaid than among women without
insurance. 34 0 The logical conclusion of this study is rather odd:
having Medicaid would lead to more deaths than lacking insurance
would.3 4 '
B. Cost andEfficiency
The U.S. spends more on health care per person and as a percent
of GDP than any other nation. 342 In total, more than $1.6 trillion is
spent on U.S. health care per year. 34 3 Four major issues address why
U.S. expenditures are high and how government-managed health care
has affected expenditures elsewhere.
First, what has caused cost to increase faster than inflation? 344
Simply put, a person receiving services at zero-cost has an incentive
to use as many of those services as have any value to the person.3 45
With government services, taxes are collected and services are
distributed with the revenue; little or no upfront cost is charged for
individual usage of the services. 346 Theoretically, citizens in a singlepayer system could spend the entire GDP on health services. 34 7
Employer provided health care experiences the same problem
because employers provide low-deductible, low-premium insurance
policies, requiring employees to pay relatively low out- of-pocket
339. See id.
340. Id.
341. See id.
342. GOODMAN, supra note 8, at 6.
343. Id. at 6, 77. The U.S. is a wealthy nation and wealthier nations generally
spend larger portions of GPD in health care than poorer nations. Id.
344. GRATZER, supra note 5, at 32-40. According to the late Nobel Prize
winning economist, Milton Friedman, health care costs are an anomaly compared
with other sectors of the economy insofar as technological advancements in health
care have been accompanied by rising costs of services. Id. It was Friedman's
view that this has been a result of federal regulation in the health care sector,
coupled with its collateral effect of employer-provided care, encouraged by the
federal tax code. See id.
345. See GOODMAN, supra note 8, at 4-6.
346. See id.
347. See id.
292
Journal of the National Association of Administrative Law Judiciary
30-1
costs. 34 8 For the health care system as a whole, which includes
employer-provided and government benefits, patients pay
approximately 180 on each health care dollar spent nationally. 349
Therefore, Americans have an incentive to consume health services
until the services received equal eighteen cents on the dollar. 350 This
leads to high usage, high waste, and high costs.3 5 ' Generally, there
are two ways to prevent this from happening: by limiting demand or
by limiting supply (rationing).3 52
Second, the U.S. already controls cost as well as many singlepayer nations do.3 13 One exception is Canada, which saved costs
during the 1990s by closing hospitals, cutting block grants to its
provinces, and limiting its use of new technologies. 354 In other
words, Canada, like the U.K., must ration care. 35 5
348. See id.
349. See id.
350. See GOODMAN, supra note 8, at 4-6.
351. See id. Goodman argues that nothing is wrong with spending an
increasing amount on health care so long as Americans are receiving the value of
their money in return. See id. If a person's income increases as he ages, he will
place a higher value on health services and will want to direct more of his income
to health care. See id. However, the value of services cannot be assessed when the
prices are removed or artificially lowered. See id. For the employer, it cannot be
determined how much in wages a person is willing to trade for health benefits. See
id. Employees do not pay the actual costs of their health services and simply
consume resources without consideration of the cost: the employee only has to pay
a low monthly premium commiserate with a low deductible; the employer picks up
the bill from the insurance company and receives the federal tax deduction. Id.
In sum, while health care costs are rising, it is impossible to know whether,
and where, the costs are rising too much if it cannot be determined what the true
value of services and treatments are. See id. This, Goodman writes, is the effect of
suppressing normal market functions by removing health care decisions from the
individual. See id.
352. See id.
353. See id. at 77. Between 1960 and 1998, the per capita increase in
spending on health care ranged between 2.5% and 2.7% in the U.S., U.K.,
Australia, New Zealand, Germany and the Netherlands. Id. Goodman writes that
this is surprising given that we have more access to technology and less rationing.
See id. Japan experienced a 3.5% increase, while Canada experienced a .8%
increase. Id.
354. Id. at 80.
355. See GOODMAN, supra note 8, at 80.
Spring 2010
The Independent Medicare Advisory Committee
293
Further still, official Canadian health care costs do not tell the
whole story: Canada lags far behind in spending on medical research
and development (a field where the U.S. leads), and, unlike private
insurance companies in the U.S., administrative costs are subsumed
in the Canadian government's total budget. 356 Indeed, single-payer
advocates often cite the fact that administrative costs are low for
However, like Canada, the U.S.
Medicare and Medicaid. 5
government can also hide its administrative costs. 358 And, like
356. See id. at 80-81. Several other factors unlock the mystery of why U.S.
spending on health care appears out of control when compared to Canadian
spending. See id. First, Canada is able to hide its administrative costs insofar as
health facilities and equipment are subsumed into the government's total budget,
whereas in the U.S., the cost of building new hospitals, for instance, is included
when people refer to total health care expenditures. See id. Second, the U.S. is the
global leader in medical research and development, whereas Canada lags far behind
in medical innovation. See id. Third, the U.S., with a population outmatching
Canada by more than ten-to-one, is burdened with a slightly older population as
well as higher AIDS, obesity, teen-pregnancy and military injury rates than
Canada. See id.
357. See, e.g., DASCHLE, supra note 6, at 146.
358. See GOODMAN, supra note 8, at 105-09; but see DASCHLE, supra note 6,
at 146. Some have argued the administrative overhead, marketing budgets and
profits of private insurance can be eliminated by instituting a government program.
See, e.g., DASCHLE, supra note 6, at 9-12, 146. Many have cited the astonishingly
low 2% cost of Medicare's overhead when compared to 9.5% for private insurance
and 11.9% for HMOs, respectively. See GOODMAN, supra note 8, at 105-06 (citing
the Congressional Research Service). Goodman argues that one-way Medicare
keeps costs low is by shifting costs to patients and doctors: for example, a
physician spends an average of six minutes on each Medicare claim, while his staff
spends an additional hour processing the claim; yet, these labor costs are not
calculated in Medicare's overhead. See GOODMAN, supra note 8, at 105-06.
Goodman asserts that if the federal government wanted, it could also eliminate the
same administrative costs associated with automobiles by eliminating private auto
manufactures and designing a uniform model. See id. at 106-07. Theoretically,
this would reduce overhead, and consumers could pay taxes in exchange for a new
car every so often. See id. Needless to say, consumers would object to such a
scheme. See id. One study concluded that Medicare spends an average of 27% of
its total spending on overhead, compared with about 16% overhead for private
insurance. See id. at 108-09. Finally, Goodman writes, by granting employers tax
deductions for health insurance, but not individuals who would buy their insurance
directly, the federal government has encouraged third-party provided insurance,
which leads to over-insurance and wasteful consumer behavior. See id. at 110.
294
Journal of the National Association of Administrative Law Judiciary
30-1
Canada, official costs do not tell the whole story of Medicare. 359
About three-quarters of a million Medicare beneficiaries pay $5,000
in out-of-pocket expenses per year, while two-thirds of all
beneficiaries must obtain supplemental health insurance policies to
cover services Medicare will not cover. 360 Also, because Medicare
does not cover as many drugs as private programs, Medicare covers
significantly more health services that might be otherwise
unnecessary had the drugs been prescribed in the first place. 361
Third, Daschle, Gratzer, and Goodman all agree that drug
companies often advertise "new" drugs that are no better than
generics or older brands. 362 All agree that drug companies lobby and
advertise aggressively, wining and dining doctors to convince them
of the latest drug or treatment. 363 Some have asserted that drug reimportation or price controls would solve the cost problem. 364
However, if the U.S. re-imported from Canada, for instance, where
price controls are in place, all this would do is import Canadian price
controls! 365 Moreover, if drug companies cannot make a profit, they
cannot innovate new technology. 366
Gratzer argues that there are three reasons drug costs are high.3 67
One, consumers do not pay directly for drugs. 368 For example, the
innovative drug Prilosec was highly successful, but once its patent
expired, AstraZeneca, a cheaper but similar product, was released
and ate away at Prilosec's market share. 369 Prilosec came out with
359. See id. at 107-09. Most Medicare beneficiaries require supplemental
private insurance because Medicare cannot cover their needs. See id. These
beneficiaries pay 30% more on health care than beneficiaries who do not purchase
supplemental insurance. Id.
360. Id. at 107.
361. Id.
362. See id. at 167-75; DASCHLE, supra note 6, at 9-12; GRATZER, supra note
5, at 145-48.
363. See, e.g., GRATZER, supra note 5, at 145.
364. See, e.g., id. at 142-44. Gratzer writes that support for re-importation is
broad, coming from academics and both political parties. Id.
365. See id.
366. See id.
367. Id
368. Id
369. GRATZER, supra note 5, at 145-46.
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295
Nexium, which was basically a mirror image of the same drug.3 70
However, since most Americans pay small co-pays for their drugs,
few consumers noticed. 37 ' Two, the FDA approval can take up to
fifteen years and cost over $1 billion to get a single drug approved.3 72
Add the cost of advertising and it is no wonder that pharmaceutical
companies attempt to regain such vast revenue before their patent
expires. 373 Three, tort suits are commonplace in the U.S., and
recoveries can be large. 374
The fourth major issue to be considered respecting high health
expenditures is the fragmented U.S. health care market. 375 States
have varying regulatory regimes; each state requires that insurance
companies provide specific services. 376 Between 1965 and 2004, the
number of medical benefits that states required by law increased from
The result has been a wide variation among health
7 to 1,823.
prices in each state. 378 For example, an unemployed individual can
purchase a policy for a family of four at a cost of $170 per moth in
Kansas City, Missouri, but a similar policy would cost more than
$750 per month in Boston, Massachusetts. 3 79
To further complicate matters, several states have experimented
with public programs to cover state residents. In Vermont, a form of
managed care was tested, and community rating and guaranteed issue
370. Id.
371. Id.
372. Id. at 142-44, 152.
373. Id at 150-55. Gratzer asserts that the FDA can reduce some of this
burden on pharmaceutical companies by contracting out its data analysis and being
more liberal about approving drugs and treatments that have already passed
European Union standards. See id. at 153-55.
374. Id. at 142-44. Gratzer submits that the FDA should grant more legal
protection to drug companies from tort suits, on the condition that the companies
invest in more post-approval drug testing. Id. at 159.
375. See infra note 376 and accompanying text.
376. GRATZER, supra note 5, at 95. Maine, for instance, requires pastoral
counseling. Id. Gratzer argues that this is a direct result of the politicization of
health care, which allows lobbyists in each state to force various interests into
health care policies. See id.
377. Id. at 93-96.
378. Id.
379. Id
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Journal of the National Association of Administrative Law Judiciary
30-1
were imposed on all insurance companies. 380 Young and healthy
residents saw premium increases that caused them to drop their
insurance policies, and thirty-one of Vermont's thirty-three insurance
The amount of uninsured
companies ultimately left the state. 38
residents rose from 9.5% to 14%.382 The state expanded the program,
but premium prices in Vermont are now among the highest,
nationally. 38 3 New Jersey also uses guaranteed issue, and it costs
more to purchase one of the state's cheapest health care policies than
it does to lease a Ferrari.3 8 4 In the six years after guaranteed issue
was introduced, that policy price shot up six-fold.3 85
In Tennessee, the state government chose to expand the federally
subsidized Medicaid program in the mid-1990s. 386 The federal
government matches more than half of the state subsidies for
Medicaid.38 7 Today, nearly a quarter of Tennessee's residents are
enrolled, and costs have increased from $2.5 billion to $8 billion
between 1995 and 2004.8 To make matters worse, Medicaid fraud
has been rampant. 389 An audit showed that TennCare was covering
14,000 beneficiaries who turned out to be dead, and another 16,500
persons who were living out-of-state. 39 0 Tennessee is not the only
state that has seized the opportunity to expand Medicaid in order to
As Gratzer writes, "creative
gain more federal subsidies. 39
accounting" is the rule, not the exception for state governments
seeking Medicaid subsidies. 39 2
380.
381.
382.
383.
384.
385.
386.
387.
388.
389.
390.
391.
392.
Id. at 92-93.
Id.
See GRATZER, supra note 5, at 92-93.
Id
See id. at 94.
Id.
Id. at 104-06.
Id
See GRATZER, supra note 5, at 104-06.
Id
Id
Id
Id
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297
C. Access to Care
It has been said that access to health care is a human right. 393
But, what good is that right if health services are strictly limited
while no one has standing to sue the government for an abridgment
of the right?394 Goodman argues that Canadians have no "right to an
MRI," for example. 395 In England, one million people are waiting to
be admitted to hospitals, while more than 800,000 Canadians are in
waiting lines for some form of treatment. 396 In Norway, 270,000, or
more than 5% of the population, are in a waiting line for medical
treatment.3 9 7 In 2003, Canadians waited an average of 8.3 weeks
between referral and consultation with a specialist, and an additional
9.5 weeks before being treated or undergoing surgery. 39 8 More than
40,000 British citizens had been waiting more than a year by the end
of 2001 for surgeries such as hip and knee replacements. 399
Senator Daschle has remarked that minorities experience a
disproportionate lack of access to U.S. health care.4 00 For instance,
he acknowledges that African-American life expectancy and infant
mortality rates are exceptionally higher than among other races.4 0 1
393. See, e.g., GOODMAN, supra note 8, at 17 (citing the U.S. Physicians'
Working Group for Single-Payer National Health Insurance); see also supra note
24 and accompanying text.
394. See GOODMAN, supra note 8, at 17.
395. Id.
396. Id. at 18.
397. Id.
398. Id. at 19. Numbers are often skewed to represent shorter waits than are
actually occurring in these countries. See id. For instance, a Canadian may require
a visit to a general practitioner, then a specialist, and possibly a recommended
treatment or surgery. See id The Canadian health system might report each wait
period in the process separately, even though the point from which a medical issue
arises to the final treatment could last months or years. See id. The problem with
lengthy waits for medical care is obvious: patients' health often diminishes or
becomes simply untreatable as they wait. See id. at 21. In England, 25% of cardiac
patients die while waiting in line. Although a degree of rationing already exists in
the U.S., especially in the Medicare program, only 5% of U.S. patients wait more
than four months for surgery. See id. at 21-23. In England, 36% wait at least four
months for surgery. Id. at 23.
399. See GOODMAN, supra note 8, at 19.
400. See DASCHLE, supra note 6, at 34.
401. Id.
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Journal of the National Association of Administrative Law Judiciary
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While minorities are more likely to be uninsured and poorer than
non-minorities, single-payer systems tend to have the same issues.402
Moreover, single-payer systems disproportionately discriminate
against the poor and elderly and rural citizens by trimming
expenditures for those groups.4 03 For instance, in England the NHS
has cut costs by reducing the amount of geriatric beds by 50% over
the last twenty years. 404 In New Zealand, patients over seventy-five
are simply not accepted to receive dialysis; there are no private
dialysis facilities in the country.4 0 5 The U.S., of course, has a
Medicare program for the elderly. IMAC's key purpose would be to
find ways to reduce Medicare expenditures.4 0 6
D. Quality and Outcomes
According to the World Health Organization (WHO), the U.S.
health care system ranks at 37th out of 191 WHO nations, just above
Slovenia and just below Costa Rica.4 07 Numerous single-payer
systems, including Canada, England, and Sweden rank higher.4 0 8
However, the factors used in assessing the quality of health systems
are highly tenuous. One factor is overall health, which relies on
infant mortality rates and life expectancy. 409 Another factor is health
system responsiveness, based on patient and expert surveys.4 1 0
402. See GOODMAN, supra note 8, at 153-55.
403. See id. at 147-65.
In England and Canada, rural areas receive
disproportionately less care than urban and wealthy regions. See id. at 27. This is
because there is greater political incentive to direct resources to populous and
wealthy regions. See id. While access to health care is a problem for the poor in
every country, in the U.S. it is strictly due to financial constraints; in Canada and
England, it is because the government has chosen which regions will get the most
services. See id.
404. Id. at 148. Approximately three times as many British citizens above the
age of seventy-five die of pneumonia each year, compared with U.S. citizens of the
same age. See id.
405. Id. at 148-49. There is literally no recourse for a person with kidney
failure above the age of seventy-five. See id.
406. See H.R. 3590, 11Ith Cong. § 3403 (2009).
407. GOODMAN, supra note 8, at 67-68.
408. See id.
409. Id.
410. See id.
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299
Indeed, this is the only factor that takes patient opinion into account,
and the U.S. ranks first in this category." Still, even this factor says
little about health quality in terms of health outcomes.412
Taken alone, lifespan says nothing about a nation's health care
system.4 13 One can imagine a physically inactive, obese, accidentprone, disease-ridden, homicidal, suicidal group of people with
access to the best health care possible, or a well-fed, active, and
healthy population with no health care access. Aside from the quality
of one's health care system, things that affect lifespan include:
lifestyle, environment, education, genetics, income, and other social
factors.4 14 With 300 million people, the U.S. is arguably the most
ethnically and socially diverse nation. Japan has the longest lifespan;
this stands to reason why Japanese Americans also have the longest
lifespan among all other Americans. 4 15 European Americans live
about as long as Western Europeans. 4 16 However, the U.S. tops out
the list of OECD nations with respect to persons over the age of
forty-five reporting good health.4 17
The U.S. also leads in infant mortality among developed nations
with about 7 deaths per 1,000 live births. 4 18 But not every country
measures infant mortality the same way.419 Switzerland, which has a
rate of 4.8 deaths per 1,000 live births, does not include infants of
less than thirty centimeters. 4 20 This excludes many low-birth-weight
infants, a grave problem that African Americans are hit by
disproportionately. 42 1 African Americans have an infant mortality
rate of 13.7 per 1,000 live births, while Mexican American and
American infants of European descent have about the same rate of
about 6 per 1,000 live births. 2 2 Yet, Mexican American infants are
411. See id.
412. See id at 67-68.
413. See GOODMAN, supranote 8, at 51.
414. Id. at 51.
415. Id
416. Id
417. Id. at 49.
418. Id. at 51-53.
419. See GOODMAN, supra note 8, at 53.
420. Id.
421. Id
422. Id. at 53-54.
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30-1
twice as likely to be born outside of hospitals as white infants. 4 23
Many have concluded that parental diet as well as drug use, lifestyle,
marital status, and genetics play heavy roles in determining infant
mortality. 424 Indeed, African Americans deliver low-birth-weight
infants at twice the rate of European Americans, even when
controlling for income, age, and education. 425 As with lifespan, the
mortality rate of American infants of European descent is about equal
to the rates of Western-European infants. 426
Arguably, one of the best proxies for determining the quality of a
nation's health care system is cancer survival. 427 The proportion of
people dying from breast cancer and prostate cancer is lower in the
U.S. than in New Zealand, Australia, Germany, France, Canada and
England.4 2 8 In the U.S., 70% of prostate cancer cases are caught
early, compared with 58% in England. 429 The survival rate for first
stage breast cancer is 97% in the U.S., compared with 78% in
England.4 30 Colorectal cancer patients have a 90% survival rate in
the U.S., compared with 80% in Germany and 70% in England.4 3'
Overall, five-year survival rate for cancer is 66% among American
men, compared with 45% of British men.4 32
VI. CONCLUSION: How WILL IMAC AFFECT AMERICAN HEALTH
CARE?
A. InsteadofIMAC, What Ought to Be Done to Curb Costs?
In single-payer systems, waits are long, specialists and treatments
are rationed and restricted, all of which leads to poor outlooks for the
elderly, the indigent and the sick.4 33 These are not problems faced by
423.
424.
425.
426.
427.
428.
429.
430.
431.
432.
GRATZER, supra note 5, at 174-75.
See, e.g., GOODMAN, supranote 8, at 53-54.
Id.
Id.
See, e.g., id. at 55-56.
See id. at 55.
GRATZER, supra note 5, at 175-76.
Id. at 175.
Id.
Id. at xix.
433. See GOODMAN, supra note 8, at 115-16.
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301
the majority of people who are young and healthy; as Dr. Gratzer
quips, single-payer medicine is "the best health care in the world
(unless you're sick)." 434 In any case, single-payer health care has
proved unpopular as a way of reforming the American health care
system.4 35 Still, some Americans look to the federal government for
a solution to the problems in the health care system.436 What options
are left?
First, Medicare and Medicaid must be reformed.43 7 While many
have asserted that costly social programs like Medicare and Social
Security, for that matter, should be pre-funded with all funds secured
in a trust, Gratzer contends that this would be impractical.4 3 8 Instead,
Gratzer argues that the U.S. must increase the current age of
Medicare, as Congress has done with Social Security, to compensate
for the rise in average lifespan since the program started.4 39 Then,
the government should establish private savings accounts, setting
GRATZER, supra note 5, at 164.
435. See, e.g., id. 177-79; Health Care Reform, RASMUSSEN REPORTS, Jan. 22,
434.
2010,
http://www.rasmussenreports.com/public-content/politics/current-events/healthcar
e/september_2009/healthcarereform. Truman, Johnson, Clinton and Obama each
initiated health care reform in their first year in office. See DASCHLE, supra note 6,
at 51, 60-61, 85. Most health care reform efforts typically began with strong
support for the proposed reform. See, e.g., id. at 53, 89. Today, about one-third of
Americans support a complete overhaul of the health care system, with 41% of the
uninsured concurring. GOODMAN, supra note 8, at 77. Seventy-nine percent of
Americans feel that covering all Americans is important even if it means raising
taxes, while 79% oppose the notion of rationing health care. Id. at 177-79.
Although a 2003 Washington Post-ABC poll found that 62% of Americans
supported a universal health care system, 40% of the respondents who had
supported it changed their minds when told it meant that their choice of doctor
would be limited. Id. at 179. The current health care bill was first presented to
Congress in the summer of 2009, and by the end of January, 2010, 61% of voters
wanted the plan dropped. Health Care Reform, supra note 435. Moreover, 42% of
Americans favored the bill, while 58% opposed the plan (18% overall strongly
favored it, while 50% overall strongly opposed the plan). Id. Of seniors, 62%
opposed the bill. Id. An astonishing 78% believed the plan would cost more than
projected. Id.
436. See supra note 435.
437. See supra note 435.
438. See GRATZER, supra note 5, at 191-92 (asserting that this exact system
has been tried with Social Security and has only served to create larger deficits.).
439. Id. at 192.
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Journal of the National Association of Administrative Law Judiciary
30-1
aside the payroll tax that currently funds Medicare and investing the
funds in stocks and bonds.440
Second, eliminate the employer-provided third-payer insurance
system that emerged through WWII-era wage controls. 44 ' To this
end, the federal government should eliminate the tax deduction for
businesses, thereby eliminating the incentive for employers to
provide insurance. 442 As Milton Freidman bluntly put it, "[t]here is
no more reason for medical care expenses to be tax deductible than
for food, clothing and housing expenses to be tax deductible."443
Indeed, the personal exemption that the tax code provides all
taxpayers should be sufficient. 4" Then, people would purchase their
own health insurance, and the incentive to overuse health resources
People would buy plans with higher
would be eliminated." 5
deductibles and pay more out of pocket. 446 Moreover, people would
retain their health insurance even when changing jobs, causing the
annual number of the uninsured to shrink dramatically.4 4 7 This can
be accomplished through individual health savings accounts.44 8
440. Id. at 191-92.
441. See supranotes 91-99 and accompanying text.
442. GRATZER, supra note 5, at 186-87.
443. Id. at 186.
444. Id. at 187-88.
445. Id.
446. Id.
447. Id. at 187-88
448. GRATZER, supra note 5, at 62; GOODMAN, supra note 8, at 5.
Essentially, individuals would pay premiums into personal accounts that would
accrue funds overtime. GOODMAN, supra note 8, at 5. Patients would use their
accounts to shop for medical services, and the medical providers would not be
"agents" of third parties (such as HMOs, insurance companies, or the federal
government). See id. Rather, medical providers would be free agents competing
for patients with quality services at the lowest prices; and patients would be selfmotivating free market actors as well, shopping for the best deals with their money.
See id. Moreover, these accounts, like home and auto insurance, would carry high
deductible insurance policies, allowing patients to use their private accounts for
cheaper, less urgent, and minor medical issues. See id. Major surgeries and cancer
care would be covered by the high insurance deductible. See id. In 1996, Congress
passed the Health Insurance Portability Act (HIPAA), which created medical
savings accounts that expired in 2001. Id. at 111. More than 750,000 were
allowed, but only 70,000 enrolled due to heavy restrictions on the plan. Id.
However, the Medicare Modernization Act of 2003 created health savings
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303
Eventually, the proliferation of such accounts would end the need for
a Medicare program for the elderly entirely, as all Americans would
have private health accounts to provide health care in retirement.
Third, to bring down the cost of insurance, the federal and state
governments could free up restrictive insurance industry regulations,
opening the floodgate for numerous providers to compete with the
best services at the lowest prices: charities, unions, and even religious
organizations might begin offering insurance plans.449 Fourth, lowincome and high-risk individuals should be provided a safety net.
Returning to point number three, Gratzer argues that the federal
government can rely on the Commerce Clause to open up a national
market, rather than allowing states to impose conflicting regulations:
opening a single national market of competing medical providers
would, by itself, cause prices to drop. 45 0 However, Gratzer further
discusses the need to reform Medicaid, creating a program that works
for those that are uninsurable. 45 1 To this end, the federal govermment
should scarp the current system and extend block grants to each
state.452
accounts, which are currently available to all non-elderly Americans. Id. Under
these plans, unused funds roll over and accumulate as regular retirement accounts.
Id. Moreover, while low deductible insurance policies carry high premiums, high
deductible policies carry considerably lower premiums. GRATZER, supra note 5, at
62-64. Goodman further stresses the need for automatic renewal, so that, once in
an insurance pool, a member's premium shall not be raised based on the emergence
of a health issue. See GOODMAN, supra note 8, at 236-38. Rather, once in the
pool, a member will be secure and all members' premiums would be raised (or
lowered) upon the annual renewal; this way, no one could be penalized for having
future and potential health issues. See id. This would only leave a problem for
initial entry, which would be difficult for persons with preexisting medical
problems. Nevertheless, these individuals shall be secured by a strengthened
Medicaid program and a freer, cheaper health care market. See infra note 452 and
accompanying text.
449. GRATZER, supra note 5, at 187.
450. See id. at 188.
451. See id. at 110-16.
452. See id Currently the system is regulated and largely funded by the
federal government while the states administer the program. Id. Instead, the
federal government could get out of the system entirely, extending block grants to
the state, rather than matching state funds (creating an incentive for state-level
waste of federal funds.). Id.
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Journal of the National Association of Administrative Law Judiciary
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B. Conclusion
IMAC's proposals will not be subject to the strict limits of
FACA.4 53 However, APA's notice and comment requirement,
coupled with the Sunshine Act's open meetings requirement, will
keep IMAC generally transparent. 4 54 Given the relative openness
under which the Federal Reserve operates, pursuant to APA and
Sunshine, one could expect IMAC's proposals to be in full public
view.455 Nevertheless, this transparency is arguably more theoretical
than actual. The Federal Reserve is seemingly transparent, but most
Americans remain generally unaware of the Federal Reserve's
activities and the economic power it wields.4 56 To this end, some
might fear that the analogy Daschle creates between IMAC and the
Federal Reserve is apropos. In fact, many would argue that the
Federal Reserve is not a model of successful monetary policy or
administrative transparency. 457
This comment takes no position on whether IMAC's approval of
evidence-based medical treatments with deference to cost will be a
successful model with respect to reducing total costs and increasing
efficiency in American health care. Instead, this comment asked
whether a national health care program would lead to health care
rationing; the conclusion of this comment is that treatments will need
to be excluded, supply will have to be limited, and the costs of finite
resources will have to be spread among beneficiaries if the federal
government's health care burden is increased.
453. See supra notes 236-238.
454. See supra notes 164-172.
455. See supra notes 164-172, 257-267.
456. See infra note 457.
457. See, e.g., Judson Berger, Mr. Sunshine? Ron Paul Wins Support to Audit
Fed
Reserve,
Fox
NEWS,
June
30,
2009,
http://www.foxnews.com/politics/2009/06/30/mr-sunshine-ron-paul-wins-supportaudit-fed-reserve/. Recent economic situations, including the housing market
bubble and the major bank failures, have caused many to question the Federal
Reserve's level of contribution as well as the power it wields over economic
affairs. See id. Congress has passed legislation to audit the Federal Reserve in an
effort to increase transparency and investigate the Federal Reserve's responsibility
for the economic situation. See id.
Spring 2010
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305
Although IMAC is not a death panel45 8 per Se, and although the
language of the bill expressly forbids rationing in its current form,
how can it be that Medicare costs will decrease, as individual
expenditures decrease, while revenues are not increased, while health
care resources remain plentifully accessible nationwide? If IMAC
would be limited to approving evidence-based treatments that do not
increase Medicare spending, how can it be said that IMAC will not
engage in rationing? The consensus among national health care
advocates is that there are finite health care resources that require
efficient and effective federal distribution.4 59 Is this not the
definition of rationing?
Free-market reformists suggest that heavy regulation, coupled
with artificial competition and artificially low out-of-pocket
expenses, have unnecessarily driven cost and usage of health care
resources up. 460 If they are correct, is it even true that health care
resources are finite? Indeed, might free market reforms reduce
federal expenditures, drive health care costs down, and expand health
care access without rationing care?
458. See supranote 1 and accompanying text.
459. See, e.g., Emanuel, supra note 281.
460. Id
306
Journal of the National Association of Administrative Law Judiciary
30-1
Index of Commonly Used Acronyms4 6 '
(ALJ) (APA) -
Administrative Law Judge
Administrative Procedures Act
(the Administrator) - Administrator of CMS
American Association for Labor Legislation
(AALL) (ABA) -
American Bar Association
(AFL-CIO) -
American Federation of Labor
Congress of Industrial Organizations
(AHA) (AMA) (BCBS) (CDC) -
American Hospital Association
American Medical Association
BlueCross and BlueShield
Centers for Disease Control
(CMMS) (CCMC) -
Centers for Medicare and Medicaid
Services
Committee on the Cost of Medical Care
(CBO) -
Congressional Budget Office
(HHS) -
Department of Health and Human Services
(FACA) (FHB) (FDA) (GDP) -
Federal Advisory Committee Act
Federal Health Board
Food and Drug Administration
Gross Domestic Product
and
Health Care Financing Administration
(HCFA) (HMO) or (Managed Care) - Health Maintenance Organization
(HRSA) Health Resource and Service Administrator
Independent Medicare Advisory Board
(IMAB) Independent Medicare Advisory Committee
(IMAC) (IRS) (LCD) -
Internal Revenue Service
Local Coverage Determinations
(MEDCAC) (MedPAC) (NCD) -
Medicare Evidence Development and
Coverage Advisory Committee
Medicare Payment Advisory Commission
National Coverage Determinations
(NHS) -
(U.K.) National Health System
(NICE) -
(U.K.) National Institute for Health and
Clinical Excellence
(OPD) -
Obstructive Pulmonary Disease
461. Supra note 22.
Spring 2010
(OMB) -
The Independent Medicare Advisory Committee
307
Office of Management and Budget
(the Secretary) or (HHS Secretary) - Office of the Secretary of
Health and Human Services
(OECD) Organization for Economic Cooperation and
Development
(QALY) Quality Adjusted Life Year
(SSA) Social Security Administration
(USPHS) United States Public Health Service
(WPO) World Health Organization
308
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30-1